EMIs on loans for destroyed homes in Wayanad? Landslide of inequality: The cost of banking priorities

By Maju Varghese* 

The Mepadi landslide in Wayanad, Kerala, July 30, 2024, is one of the largest in the country, in terms of debris flow of nearly six million cubic meters—enough to fill 2,400 Olympic-sized swimming pools. The Landslide is considered the largest in terms of the debris volume.  This is five times larger than the Malpa landslide in Uttarakhand (1998) where more than 200 people lost their lives, previously considered the largest, and 300 times larger than the Pettimudi landslide (2020) in Munnar where 66 people lost there lives. The catastrophe has claimed more than 400 lives, with over 60 individuals still missing under the debris. Heavy rains of more than 570 mm over 48 hours led to the tragedy.

Now, four months later, affected communities’ calls for loan waivers remain unmet, as bank boards continue to evade decisions on the issue, with the Reserve Bank of India deferring responsibility back to individual bank boards. Survivors are struggling to pay EMIs on home loans for destroyed homes, agriculture loans for ruined crops, and other debts. Economic activity had come to a standstill, particularly in the tourism sector, affecting countless individuals, including drivers, shopkeepers, handicraft makers, and street vendors. This has not been rebound even to this day.

Banks even attempted to collect EMIs from relief camps, prompting intervention from the state government. The Chief Minister demanded a complete loan waiver at the first State Level Bankers' Committee (SLBC) meeting and announced a loan waiver from Kerala Bank, a state-owned bank, urging others to follow suit.

However, major public sector banks have remained largely silent, offering limited contributions to the CM's Relief Fund rather than substantial relief to the affected individuals. They seem to ignore the fact that they have raised significant resources from the state.

The total loans in the affected area amount to a mere 35.30 crores, including 11 crores in agriculture loans and the rest in home loans, personal loans, SHG linkage loans, vehicle loans, etc. Over 626 hectares of agricultural land, including 359 hectares belonging to small and marginal farmers, have been lost. More than 100 hectares have been temporarily fallow, and perennial crops, a vital source of livelihood, have been destroyed. The entire area is now unsuitable for agriculture due to soil damage.

In the case of housing loans, the assets have been destroyed or rendered uninhabitable. The entire area is at risk of further landslides, making it unsuitable for habitation. Many areas, including Chooralmala, Mundakai, and Punchirimattom, may face similar issues, necessitating a comprehensive rehabilitation plan. Under these circumstances, a complete loan waiver would be a humane and compassionate act, allowing people to rebuild their lives. It would also be a fitting tribute to the deceased and a source of hope for the survivors.

The silence of the state and central governments and the banks is particularly striking in the context of their financial performance. Public sector banks have reported a profit of over 1.4 lakh crore in 2024, a 35% increase over the previous year. They have also written off Rs 1.70 lakh crore in the same year, with total write-offs over the past five years amounting to Rs 9.90 lakh crore, mostly benefiting the corporate sector. This double standard reveals the banks’ priorities: while they readily collect deposits from the public, they reserve loan write-offs for corporations and shirk their responsibility to communities in dire need, even amidst natural disasters.

The central government has also failed to allocate any funds for the disaster. Ironically, the state government has approved a significant increase in the monthly salaries of the Public Service Commission chairman and its members, which will cost 35 crores—the same amount needed to waive off the loans of the landslide victims.

In the face of billions in profits and trillions written off for corporates, the voices of those affected in Wayanad seem lost. When ordinary people request minimal relief for a crisis beyond their control, they face laws, regulations, guidelines, and court orders. The impact of climate change is borne by communities like Wayanad’s, yet resources continue to flow to the sectors and corporations that drive such development, perpetuating the cycle of inequality and environmental disaster.

The questions and demands raised by the people in Wayanad are significant, not just for Kerala but in the broader context of the alarming increase in climate-related disasters over recent years. Extreme weather events—lightning, storms, heavy rains, floods, landslides, heatwaves, cold waves, cloudbursts, cyclones, and snowfall—are becoming more frequent and intense. These events disproportionately impact the most vulnerable populations, who often lack the resources to adapt to the relentless cycles of loss and damage.

Policies and measures for disaster preparedness, as well as efforts to combat climate change, must include provisions to absolve the debt of individuals affected by extreme climatic events. The current Reserve Bank of India (RBI) master circular is insufficient, as it focuses primarily on moratoriums and payment deferments. Instead, the principle of force majeure should be applied in cases where extreme weather events prevent individuals from fulfilling their financial obligations initiating a waive off for their loans.

The campaign led by landslide victims emphasizes the need for a new policy framework. This framework should ensure that those whose livelihoods and lives have been devastated by such disasters receive full loan waivers to help them rebuild. The cost of such interventions must be borne by the state, society, and their institutions, as the extreme weather conditions destroying homes and livelihoods are not the fault of the affected communities. Instead, they are often the result of systemic processes and unchecked capitalist greed.

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*Director, Programme & Operations, Centre for Financial Accountability (CFA)