Farmers argue that the changes are discriminatory and impractical, especially given the volatile state of agriculture, with unpredictable rainfall and unremunerative market prices. (AI Generated Image)
With the cultivation season fast approaching, farmers in Tamil Nadu’s Erode district have raised serious objections to new state directives that condition agricultural crop loans on CIBIL credit scores and a no-objection certificate (NOC) from local banks.
On 18 July 2025, members of two prominent farmer associations, Keel Bhavani Murai Neer Pasana Vivasayigal Kootamaippu and Keel Bhavani Ayacut Nila Urimaiyalargal Sangam, submitted a formal petition to S. Muthusamy, Minister for Housing, Prohibition, and Excise, demanding immediate withdrawal of the new requirements. The submission was reported by The Hindu.
The protest stems from a recent circular issued by the Registrar of Cooperative Societies (RCS), mandating banks to verify farmers’ CIBIL scores before sanctioning loans through cooperative credit institutions. Another directive requires applicants to obtain a No-Objection Certificate from the service area branch of a commercial bank. “Obtaining an NOC costs between Rs 600 and Rs 1,000, placing an unnecessary financial burden on farmers,” the petition stated, as cited by The Hindu.
Farmers argue that the changes are discriminatory and impractical, especially given the volatile state of agriculture, with unpredictable rainfall and unremunerative market prices. The traditional model of interest-free or low-interest cooperative loans had previously been a crucial safety net.
The unions have labelled both the CIBIL-score linkage and the NOC requirement as “burdensome” and contrary to the state’s pro-farmer stance. They fear that any delay in access to loans may jeopardise sowing plans, particularly with the scheduled release of water from Bhavanisagar Dam into the Lower Bhavani Project canal on 15 August 2025.
According to the report, association president S. Periyasamy, secretary K.V. Ponnaiyan, and federation secretary R. Eswaramoorthy were among those who met the minister. Mr Muthusamy reportedly assured the delegation that their concerns would be conveyed to Chief Minister M.K. Stalin.
Broader Policy Context
Credit score-based lending is gaining favour in India’s broader banking sector, with new risk assessment models being deployed to reduce loan defaults. However, applying these frameworks uniformly across urban and rural populations has drawn criticism, especially when small and marginal farmers are disproportionately affected.
While private and public sector banks may require CIBIL reports, cooperative banks traditionally serve unbanked and underbanked segments, where such parameters are often non-applicable or misleading.
Awaiting Government Response
As of now, no official rollback has been announced. The issue could evolve into a broader political flashpoint if more farmer groups join the protest, especially with the Kharif season underway in various parts of Tamil Nadu.
