How a co-op bank in Telangana helped avert farm woes for six decades

Every time Madugula Komaraiah switches on the TV to catch up on the farmers’ protests at Delhi borders and sees their hardships, he thanks his stars. For, his village in Telangana hasn’t faced any agrarian crisis in the past six decades. The sarpanch of Mulkanoor village near Bheemadevera-palli mandal has someone else, too, to thank for that—a cooperative bank.

And it’s not just Komaraiah. Almost every farmer, The Federal spoke to in this village, feels the Mulkanoor Cooperative Rural Bank and Marketing Society in Warangal urban district has not only stood by them but has also changed their lives for the better.

The cooperative bank and marketing society looks after the farmers’ needs—right from providing loans for ploughing the fields to getting them a better deal for their produce, not to mention the bonus from the profit. What’s more, at the end of every crop season, a farmer would be left with some money in his account after repaying what he had borrowed in the preceding six months.

How it works

Most of the transactions between the bank and the farmer happens in the form of kind, not cash.

At the beginning of the season, the farmer would know his loan eligibility. He begins his transaction by drawing seeds, fertiliser and pesticides from the godowns operated by the bank. For payment of wages to the labour, he would take cash.

When the produce is ready, the farmer calls the bank’s representative in the village to weigh and lift the stock. The society buys as per the minimum support price (MSP) announced by the government. The money would be calculated on the spot, the dues would be deducted and the balance transferred into his account the next day.

After the society processes the items and sells it in the market, the farmer would get 50 percent of the profit amount as a bonus.

“For every Dussehra festival, we get between ₹6,500 and ₹15,000 depending on the quantity we sold to the society,” says Jeevan Reddy, a four-acre farmer from Bheemadevarapally village. “The bonus takes care of our festival clothing needs,” he adds.

The society buys paddy and cotton that is predominantly cultivated in the region while maize is a small segment.

Although the society initially offered storage facilities to farmers who wanted to keep their stocks till they got a good rate, no farmer utilised it. They find selling the produce to the society beneficial.

“If we have to take the produce to the procurement centres outside, each quintal would involve ₹200 transportation cost and the waiting period is uncertain. We don’t know when we would get the money in our accounts,” says Kottapalli Bapanna, a farmer with 4.3 acres in Mulkanoor. “Here, we get the bonus on the crop and dividend on shares. There is no cheating in weightage,” he adds.

The loan and the crop are insured with the Life Insurance Corporation (LIC), so that there is no burden on the farmer or the bank in case of a natural calamity, such as floods or droughts. However, these villages which mostly depend on water tanks, groundwater and rain, have never seen a drought or excess rainfall since inception of the bank in 1956.

No crop loss meant the bank got 100 percent return, and this has been true all these years.

“We don’t have recovery agents. Farmers pay themselves by asking us to lift the produce,” explains administrative officer Venu Madhav.

“When the YS Rajasekhara Reddy government announced the farm loan waiver in 2007, there was not a single applicant from our bank,” says bank general manager M Ram Reddy.

When the same government announced ₹5,000 cash incentive to farmers who were regularly servicing their loans, all the 7,500 member farmers got amounts credited in their accounts.

All the farmers are insured. In case of death of a farmer or their spouse, assistance for the funeral would be sent to the doorstep of the bereaved family and the insurance claim would be settled.

In 2019, 149 members of the bank died. Their families were paid ₹34 lakh under the welfare scheme, after the amounts due against their names were deducted.

The farmers can take solace from the fact that their children would not be penalised for the loans they had taken, in case of death. The bank made this possible by shifting five percent of the bonus amount to the welfare fund.

Mulkanoor Cooperative rural bank, which was forced to change its nomenclature to Mulkanoor Cooperative Rural Credit and Marketing Society Limited because of the RBI norms, is spread in 18 villages, 14 panchayats and four hamlets.

It has 47 godowns covering all the villages for storage of the seeds, fertilisers, pesticides and to stock the produce procured from farmers. It mainly buys paddy and cotton, the two items predominantly cultivated in this area.

The bank gives membership only to those having a minimum of one-acre cultivable land and own house under its jurisdiction.

No farmer suicides

Since inception of the bank in 1956, none of the villages under its jurisdiction has reported a farmer suicide due to financial distress.

Mulkanoor’s sarpanch, Komaraiah, says, “A lot of farmers’ suicides were happening in Warangal and Karimnagar district due to crop failure and lack of remunerative prices. But thankfully, the farmers in our villages are not exposed to such agrarian crisis.”

“There is never a stampede for seeds and fertilisers. We just go to the godown, take whatever we need and walk to our fields,” says Karunakar, a Dalit farmer, adding, “The long queues at fertiliser counters outside our villages are always a surprise for us.”

The society is the biggest producer of seeds (marketed as Mulkanoor seeds) and buys the fertiliser and pesticides well in advance and stocks them in the godowns.

Ravinder, in-charge of the sprawling godown at Bheemadevarapally, says that stocks are ready for the season commencing in June-July.

Loans for all needs

Crop loans come for a 7 percent interest.

Farmers also get long-term loans to buy tractors, harvesters, and other agriculture implements and dairy. Mango and citrus farmers also get long term loans for 7 years (14 crop seasons).

The bank offers loans for the education of the farmers’ children within and outside India, for medical needs and even weddings of their daughters. From the current year, the bank has also started giving housing loans.

The maximum repayment period is seven years, which the farmers say is convenient.

“We always look for early closure of loans, especially if the activity goes smoothly. If we face problems, the bank gives us the option to pay the interest and defer the principal amount,” says Narottam Reddy, a farmer who came to sign surety for another farmer for a loan for a tractor.

Marasu Narasimha Rao, one of the beneficiaries who cultivates in his two acres, has recently set up a juice stall, on a loan of ₹1 lakh from the bank. “I pay 4,000 every month. This is apart from servicing the crop loan,” a jubilant Narasimha says.

Janagama Rajaiah is a second-generation member in the society. He has made his son join the society also. This owner of 3.75 acres took loan for his son’s PhD in Hyderabad.

“When we need money for any purpose, we remember Mulkanoor bank and our requests are conceded,” he says confidently.

He says the seeds and pesticides are costlier in the open market. He gets an yield of 35 quintals per acre. He got ₹12,000 bonus last Dussehra.

The general manager says Mulkanoor society is different from other agriculture cooperatives because of the Acts it adopted. The Mulkanoor society functions under the Andhra Pradesh Mutually Aided Cooperative Societies Act (APMACS) brought during the NT Rama Rao time in 1995. The other cooperative societies remained under the Hyderabad Cooperative Societies Act, 1952.

At a time when agriculture is in deep crisis and banks are fast heading towards privatisation, Mulkanoor bank sets an example for the best running of the two important sectors.

The bank’s chairman Praveen Reddy says: “We organise training camps for the farmers on the latest technologies and techniques in cultivation. We regularly conduct soil tests to guide the farmers on suitable crops. We have an officer for each village to guide them.”

His father A Vuswanadha Reddy, who was the bank’s architect, is no more but Praveen vows to uphold the founding principles.