Farm Uneasy: Despite push towards access to formal credit, most farmers continue to rely on middlemen for loans

Farm Uneasy: Despite push towards access to formal credit, most farmers continue to rely on middlemen for loans

To meet their growing expenditure, from daily needs and health emergencies to weddings and sending their children abroad for studies, farmers rely on Arhtiyas despite the heavy interest they pay. Arhtiyas remain crucial for the farm economy of Punjab and Haryana 

When Anita Sudkan (40), a farmer in Haryana’s Sudkain Kalan village, needed an emergency loan for treatment of a liver ailment, it was not a bank she approached.

Sudkan went instead to her Arhtiya (commission agent), who sent an aide with the Rs 20,000 she needed for treatment at a private hospital in the Kaithal district, almost 45 kilometres away from her home in Jind.

It has been seven years since then, but she is still repaying the Rs 4 lakh she has borrowed on top of the Rs.20,000.

“People in villages maintain a passbook with their Arhtiya. Every time we take money from them, the amount is added to it. All our grains and our crop output goes to them anyway. They deduct the amount of interest or initial loan after discussion with us and give us our remaining profits,” Sudkan says.

Arhtiyas form an important link between farmers and the buyers of their produce and are a crucial part of the farm economy of Punjab and Haryana.

“The relationship of an Arhtiya and a farmer is that of body and soul. We are interlinked together,” Sudkan explained.

Arhtiyas form an important link between farmers and the buyers of their produce and are a crucial part of the farm economy of Punjab and Haryana.

The role of Arhtiyas 


Arhtiyas work under the Agricultural Produce & Livestock Market Committee (APMC) Mandi. These commission agents are primarily found in Punjab and Haryana and pocket 2.5 percent as commission on procurement of MSP-assured crops to provide services to farmers including labour for storage, cleaning, bagging, loading and transportation of their grains.


MSP is short for Minimum Sport Price assured by the government for the produce of farmers.

Arhtiyas were traditionally money lenders and came to agriculture when regulated markets started during the 1970s.

Well-laid-out market yards and sub-yards were constructed with the basic objective of ensuring reasonable gains to the farmers by ensuring fair play of supply and demand forces, regulating market practices and attaining transparency in transactions.

These agents, often called ‘bichauliya’ or middlemen, only act as assistants in simplifying a transaction between farmers and buyers, whether a private trader, exporter, or government organization like the Food Corporation of India (FCI).

There are 1,860 mandis in Punjab and 400 in Haryana, with more than 23,600 and 22,000 Arhtiyas registered in the states, respectively, according to the latest government figures.

Each Arhtiya deals with anywhere between 40 and 200 farmers and have been integral to the agricultural landscape of Punjab and Haryana.

Farmers of both Punjab and Haryana continue to remain under the clutches of Arhtiyas as they take loans for lavish weddings, to send their children abroad

Why the dependence on Arhtiyas? 

Farmers in the two states have remained dependent on Arhtiyas despite an array of government support schemes.

The schemes range from the provision of Kisan Credit Cards to ensuring credit to farmers at subsidized interest rates to meet short-term credit requirements for the cultivation of crops, agricultural investment and post-harvest expenditure.

Farmers are also provided credit for the consumption requirements of their households and working capital for the maintenance of farm assets and activities allied to agriculture.

Rising expenses 

Ramandeep Singh Mann, farmers’ leader in Punjab’s Bhatinda, says the expenditure of farmers has increased more than the money they secure under government initiatives.

“Almost 25-30 years back, only big landholders held big weddings. Weddings for others would be held in Dharamshalas. But now, the expenses of farmers have increased manifold. They take out loans to send children abroad, whose expense ranges between Rs 20-25 lakh. All this leads to a rise in debt trap between Arhtiya and farmer,” he says.

“This is a trap no one can come out of. Farmers are only earning their livelihood while paying them interest. Interest to Arhtiyas is part of annual expenditure,” Mann adds.

Loan defaults 

Several farmers who borrow money wait for election time and the loan waivers that sometimes come along with the polls. This leads to their loan accounts becoming Non-Performing Assets (NPAs), which leads to a drop in their credit scores, says Dr Sukhvinder Singh, a former Associate Professor at the Centre for Research in Rural and Industrial Development.

“About 20 percent of accounts turn to NPAs in villages of Punjab and Haryana. Their CIBIL scores fall and bank credibility goes away. You will see that over 80 percent farmers are defaulters in one or the other government schemes, be it KCC (Kisan Credit Card) or cooperative banks. This becomes a reason for farmers to not get newer loans,” he says.

The professor also highlights education loans and home loans are not provided by banks to farmers, who make up 80 percent of the farming community, in the absence of collateral.

“Farmers have all kinds of needs. Increasingly, they have been sending their children abroad to study and have built huge homes. These actions need money and only Arhtiyas provide it to them,” he said.

Loans without collateral 

Bank loans require collateral and entail limits and paperwork, says Mann.

“But most farmers have already maxed out the small limits bank provide. With no other way for farmers left to borrow, they turn to an Arhtiya,” he adds.

Despite interest rates ranging anywhere between 18 percent and 24 percent levied by these unofficial moneylenders against 7 percent to 12 percent charged by banks, depending on the amount loaned and the farmland owned, farmers continue to take loans from Arhtiyas.

Relationship of trust 

The trust factor passed on from generation to generation is a reason why the Arhtiyas have survived so long, says Sandeep Sabharwal, CEO of SLCM, an agricultural solutions group.

“Arhtiya is not the bad man here. Farmers have placed their trust in them generation after generation. Arhtiya was the last resort for the farmer because no one was giving them any loans. He was there for them when no one else was,” he says.

Farmer Farmers remained up in arms against the three farm laws which would have done away with the concept of middlemen or Arhtiya, fearing prices of crops will fall below MSPs if APMC yards are shut down

Farm laws and Arhtiyas 

Arhtiyas were the at the helm of the farmers agitation against three farm laws that had been brought in by the Narendra Modi Government in 2020 and had to be repealed in 2021.

The Arhtiyas had joined the agitation because the first of the three farm laws- Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 was aimed at allowing trade in agricultural produce outside the existing APMC (Agricultural Produce Market Committee) mandis, doing away with the concept of Arhtiyas.

Arhtiyas and farmers both feared that the APMC mandis, where they sold their produce, mostly wheat and rice, would be shut once private players start trading in farm produce outside the mandi premises.

They were concerned that once the APMC mandi system becomes redundant, foodgrain procurement based on Minimum Support Price (MSP) too would come to an end.

The Centre in the past too has made efforts to free farmers from Arhtiyas through attempts such as trying to make procurement agencies pay the farmers directly.

In 2021, the Punjab government agreed to the Centre’s Direct Benefit Transfer policy, which sends money directly into the bank accounts of farmers.

Little was achieved because the capital-rich Arhtiyas are a powerful lobby, and have opposed the move. The state government was then forced to amend the procurement software so that the Arhtiyas will continue to be involved even in the direct payment process.

Although the amount comes directly to the accounts of the farmers, it only happens after the Arhtiyas have clicked on a Pay Now button, being able to keep track of the money being sent to a farmer’s account.

The Pay Now option has only been installed for the Arhtiya to know the amount that has been deposited in the accounts of farmers. If the option is not clicked, the payment will anyway happen within 72 hours.

There are also several instances wherein Arhtiyas continue to divert money from the accounts of old and illiterate farmers to their own accounts.

“Such measures are important because if Arhtiyas do not get such messages then the farmer can use that money somewhere else and may not repay the loans,” Manish Goyal, an Arhtiya at Jind’s National Agriculture Market yard in Haryana, said.

(Up next: Part four of the series on the use of nano urea in the country and the reasons for its low percolation in villages of Punjab and Haryana)

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