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Agriculture Sector is becoming high risk for banks

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Mohit Kumar
Mohit Kumar
Hey I am Mohit. I am the editor of the Newsinterpretation. Writing is my passion and financial column writing is my hobby.

The Central Bureau of Investigation (CBI) recently caught wind of a long-running scheme by over 100 agro-based companies in India, which collectively racked up a debt of thousands of crores of rupees across various banks in India.

These agro-product businesses first caught the attention of the CBI five years ago and recently made it back into the spotlight when over two dozen firms dealing with agriculture-based products were accused of committing bank fraud of 1400 crore rupees.

The SA Rawther Spices scam

One of the firms involved in the case was SA Rawther Spices Private Limited, a firm primarily dealing with pieces and coffee, which allegedly took out a loan worth 350 crore rupees from Jammu and Kashmir Bank. The firm first approached the bank in 2002 for a 2 crore loan, which was granted. Over the years, the officials at the bank continued to sanction loans of various amounts to the company by bypassing all procedures and norms.

The bank sanctioned a total of ₹352.72 worth of loans to the company over a 15-year period, which was found to be highly disproportionate to the amount of collateral it demanded in return- which only amounted to ₹147.43. The bank continued to grant extremely high-value loans to the company despite its failure to return the decided-upon amount on numerous occasions, due to which it racked up a mountain of debt and was officially written off as a Non-Performing Asset (NPA) in 2017.

SA Rawther continues to owe the bank the outstanding debt, which it tried to recover under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Act (SARFAESI), and has also attempted to auction off the mortgaged properties it received as collateral. However, it is yet to recover even a single paisa.

Following this financial disaster, the Anti-Corruption Bureau (ACB) filed a case against both Anish Mohd Rawther, the director of SA Rawther Spices Private Limited, and the officials of the Jammu and Kashmir Bank, accusing them of consorting to commit bank fraud to the tune of over rupees 350 crores.

Similarly, the CBI has also named Shree Basant Oils Limited, which committed bank fraud against Canara bank of around Rupees 124 crore earlier this year. The company’s ledger entries were found to be fabricated or adjusted as per their convenience and neglected to show its accurate debts and earnings. It was able to procure several loans from the bank by extending the loan period with forged financial data. Another company booked was Saurav (India) Limited, which allegedly lost its creditors rupees 126 crores.

Why is the agro-based sector failing in India?

So, the big ticket question is- why is the pattern of non-payment of dues so prevalent in agro-based companies? What is pushing these companies to partake in such elaborate and misleading schemes just to keep themselves afloat?

The agriculture sector in India is seen as a huge paradox. Though a major chunk of our population is involved in agriculture, it is still seen as a failing sector and is riddled with seemingly unsolvable challenges. The country has been rampant with farmers protesting against low compensation for their efforts and high debts due to failing crops. Many crops are also lost in the farm-to-food process due to improper storage leading to pest infestations or rotting of produce and delays in transportation. Farmers also prefer to grow cash crops like sugar, cotton, and wheat for more money rather than essential pulses, fruits, and vegetables, leading to demand-supply mismatches.

Many companies working with these farmers may also suffer due to these deep-rooted problems right at the source of their raw materials. It seems that the efforts required to make money in the agriculture sector and continuously disproportionate to the rewards reaped, making it a thankless job.

Also, with more and more people moving out of rural areas to pursue higher education and working towards landing jobs in the IT sector or pursuing careers in STEM for better lifestyles, not many may remain to work in agriculture. Unless sustainable reforms are made to increase incentives for farmers as well as benefit bulk buyers, India may soon lose its place as one of the world’s most important agricultural hubs.

How these agro companies are able to fool banks

A shocking amount of agro-based companies were able to fool and defraud banks using a variety of dishonest means. In a few cases, like the SA Rawthor case, the bank officials willingly gave the firm loans against low-value collateral and were most likely paid off to cover up the company’s negligence in paying their dues. These same banks were able to divert funds to the companies by issuing them to shell companies operated by the borrowing company, which are fed through various routes and then used.

However, in other cases, firms were able to arrange for loans by inflating their net worth and deflating prior debt by forging their documents in order to meet credit requirements and avail of loans.


India’s agro-based sector seems to be in big trouble. The CBI recently booked over 100 agro-based companies of taking part in various bank frauds and loan schemes, racking up debts of thousands of crores. In a few cases, failing companies were able to secure higher loans by forging documents or applying through shell companies, and others were able to take out loan after loan thanks to connections among high-ranking bank officials and under-the-table dealings. These firms are currently under investigation and face major penalties for all the losses they have caused to their investors, creditors, and the country.

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