23% rural citizens borrowed money during the COVID-19 lockdown

The Gaon Connection national rural survey found the highest percentage of borrowings by households were in Haryana, Punjab and Assam, and Arunachal Pradesh, the least.

Sarah Khan
| Updated: Last updated on August 17th, 2020,

Deepak Sahu is a migrant worker, who used to work in a dairy in Goa. He returned to his village home in Jharkhand’s Gumla district in May, following the nationwide lockdown imposed in view of the COVID-19 pandemic. Unable to find any work in his village, Sahu had to borrow Rs 3,000 from a friend to meet his household expenses.

“I used to earn Rs 10,000 per month in Goa. Now, I am finding it difficult to make ends meet. There’s barely any work under MGNREGA and I am reluctant to go back because of the rising number of corona cases in the city,” Sahu told Gaon Connection.

A first-of-its-kind national rural survey, based on face-to-face detailed interviews with 25,300 respondents carried out in 179 districts across 20 states and three union territories by the data and insights arm – Gaon Connection Insights – of Gaon Connection, India’s largest rural media platform, found that almost every fourth respondent borrowed money during the lockdown.

Out of this, over two-thirds of the households (71 per cent) borrowed money to meet household expenses, one-tenth (10 per cent) for medical treatment eight per cent for farming purposes. Nearly nine out of 10 households faced some sort of financial difficulty during the lockdown. 

The latest data of bank accounts under Jan Dhan Yojana said there are over 40.05 crore beneficiaries of this scheme that the deposits in these accounts are in excess of Rs 1.3 lakh crore. The Pradhan Mantri Jan Dhan Yojana (PMJDY) launched on August 28, 2014, aimed at providing universal access to banking services to the people in the country, with at least one basic banking account for every household. It also aimed to provide financial literacy and access to credit, insurance, and pension facilities.

Sahu, however, was not aware of ‘Jan Dhan’ accounts. People like him relied on borrowing money from relatives and money lenders.

The survey revealed that even a majority of the richest households, as well as those that did not suffer a fall in income, reported facing extremely high or high monetary difficulty during the lockdown.

Households in Haryana, Punjab, Assam, Uttar Pradesh, Bihar, Jharkhand, Odisha, and Madhya Pradesh reported higher percentages of borrowing money during the lockdown while Arunachal Pradesh reported the least.

Only five per cent of respondents took bank loans. The rest of them borrowed money from private sources – 51 per cent from friends or neighbours, 21 per cent from money lenders, and seven per cent from relatives.

This survey, showcasing the ‘Invisible Casualties’ of COVID-19, was designed and data analysed by the New Delhi-based Centre for Study of Developing Societies (Lokniti-CSDS). The survey findings have been put together in the form of a report – The Rural Report – by Gaon Connection. This exhaustive 150-page report is the first set of national insights documenting the post-COVID-19 impact on rural India (For complete details, visit www.ruraldata.in). 

The COVID-19 ‘Atmanirbhar’ relief package first announced by Prime Minister Narendra Modi gave high hopes to many. However, when Finance Minister Nirmala Sitharaman gave the details of the package, it was clear more than half of the nine major proposals had a longer-term horizon rather than providing immediate relief to those in need.

On being asked if the government considered putting more money – Rs 5,000 to Rs 7,000 – in the hands of the people as recommended even by Nobel laureates, Sitharaman said, with utmost confidence, that the slew of measures being taken by the government “will have a greater impact”.

During March and April, money the poor got in their hands has been Rs 33,176 crore. This includes Rs 10,025 crore to women Jan Dhan account holders, Rs 16,394 crore to farmers under PM Kisan Yojana, Rs 2,807 crore to old persons, widows, and the disabled, and Rs 3,950 crore to construction workers, paid from the Building and Construction Workers’ Cess Welfare Fund. To help the poor tide over the COVID-19 crisis, the government had announced an ex-gratia payment of Rs 500 to be credited to women Jan Dhan account holders for three months starting from April 2020. The benefits of the government’s relief package, however, are not being reaped by everyone.

Susena Lakra of Jharkhand’s Bangru district said that while many received cash transfers in their Jan Dhan bank accounts, a majority of people don’t have access to these accounts owing to discrepancies in account details. “Most of the families are dependent on farming and since markets were closed, they circulated their produce amongst themselves. The ration is also being distributed by the administration so people are managing, but for how long? There are barely any jobs in the village,” said Lakra when asked how people are managing without money.

Anjali Devi, a resident of Farasimal village in Jharkhand, told Gaon Connection she had to take more loans for the sustenance of her family during the lockdown. This was in addition to a loan she had taken for a bike and is still paying off. 

Souparno Chatterjee, Executive – Communications, Resource Mobilisation and Partnership at PRADAN, a rural development non-profit, said the major reason behind people still resorting to borrowing money from friends and money lenders is their limitation, especially in far-flung areas, to access the banks during a strictly-enforced lockdown. “The banks are located in block headquarters which are five to 10 kilometres far from the sectoral villages. How does one reach?” he asked.

Data suggested that 40 per cent of Jan Dhan account holders could not access the government’s COVID-19 relief. 

Chatterjee said that policies are announced without taking into account all necessary factors. He cites demonetisation as a prime example for this. “People in remote places came to know only six months ago that whatever money they had – a 500 rupee note – became redundant 2.5 years ago,” he said. “Such a situation is still prevailing during the pandemic. People are unable to reach out to the bank and they need cash. What is the fall back option for those who aren’t a part of organised self-help groups? They have to depend on local systems and local money lenders,” he added. 

According to Chatterjee, the solution to this issue lies in streamlining the structure of loans being provided to people who are in need. He is also of the opinion that this needs to be done at the earliest because of the volatile nature of the current situation. “Banks need to think of systems which are more customer-friendly and establish simpler mechanisms for people to register, making it easier to access loans,” he told Gaon Connection.