Most of the heavily indebted farmers took their own lives because they had borrowed from village moneylenders, who use strong-arm methods to seize assets. Institutional credit, on the other hand, is remarkably lenient when it comes to recovering dues. The finance minister's logic therefore seems to be -- replace local credit with bank finance, and farmers will no longer be driven to suicide.

He has a point. Yet it is also a fact that such attitudes can be taken advantage of by repayment-shy borrowers, and banks will see a further addition to their burden of bad debts. There could be two solutions to the problemof mounting bad debts. One of them is to treat them like revenue arrears, and sell off assets to recover the dues.

This will help banks, but is also likely to send the suicide rate soaring. The other alternative is what Sinha has recommended, which is to judge whether a default is wilful or not, and help those who can't pay due to unavoidable reasons.

While this is the more humane approach, the problem is that banks are being called upon to play an essentially social role, one which they can hardly afford, given the pressures of competition. The dilemma can only be resolved by bold initiatives such as lending through NGOs, and the emphasis on funding self-help groups is the right way to go about rural financing.