Kerala HC slams Centre over loan waiver for Wayanad landslide survivors

For 43-year-old Sabitha S, who was not physically affected by the horrific landslide in Wayanad, Kerala, in July last year, life turned for the worse after the disaster. Her house is located in a relatively safer location, but she lost her business and is struggling to support her family.

The small-scale entrepreneur, who has an artefact business of making items from coconut shells and bamboo in Chooralmala in Wayanad district, took multiple loans from banks and Kudumbashree, a poverty-eradication and women-empowerment programme in the state, to regain ground financially, but the banks have allegedly pressured her and others who took similar loans to repay with interest rates mounting.

Beneficiaries seek loan waivers

The women beneficiaries from the landslide-affected zones, including Sabitha, subsequently moved the Kerala High Court seeking a complete waiver of loans taken by families who lost their homes and livelihoods in the 2024 disaster.

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A petition, filed by a collective of affected members of the Kudumbashree scheme, argued that continuous loan recovery efforts by the banks violate their fundamental right to live with dignity guaranteed under Article 21 of the Constitution.

“Some of us were even misled into signing renewal documents for compound interest loans; they told us those papers were for CIBIL updates. They only gave a moratorium with interest, not any real relief. I have both linkage and investment loans through Kudumbashree and an entrepreneur loan from the bank. Now I can’t even get an education loan for my children, one of which is doing post-graduation, and the other is an undergraduate,” Sabitha told The Federal.

Minimol, who is also from Chooralmala, had a similar story to share. The 45-year-old woman, who lost her husband just two months before the disaster that destroyed her house, took substantial loans for her husband’s treatment when he was alive. With no job or income now, her only hope remains with her sons, who recently left for the Gulf seeking jobs.

Also read: Wayanad landslides: Centre's loan conditions face flak; Kerala govt seeks flexibility

Minimol continues to receive repeated repayment notices from several banks, while only the cooperative bank has written off her loans.

The stories of Sabitha and Minimol are common throughout the community in the hilly areas of Chooralmala, Mundakkai and Attamala, also in Wayanad, where survivors of the landslide continue to struggle to get their lives back on track.

Hundreds of families were displaced by the landslide that struck on July 30 and the intense rain that followed. More than 340 people were killed while massive damage was caused to houses, roads, farmlands and other infrastructure related to people’s livelihood.

The petitioners seeking relief are organised under a network called Women for Loan Relief and represent 64 Kudumbashree neighbourhood groups. Most of the members had taken small and medium loans from banks and cooperatives for farming, animal husbandry, micro-enterprises, and education before the calamity struck.

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Their plea states that the landslides wiped out all productive assets, leaving them without any means of repayment.

Nearly Rs 1 crore remain unpaid

“Together owe around Rs 4.1 crore in linkage loans taken through Kudumbashree-linked micro-credit, and another Rs 1.4 crore in internal lending. Of this, nearly Rs 95 lakh remain unpaid. In several cases where borrowers died in the landslide, the liability has been transferred to surviving members of the self-help groups,” said Zeenath, a member of the network.

The Kerala High Court had initiated suo motu proceedings in August 2024 to monitor post-disaster rehabilitation in Wayanad, and the women’s petition was tagged with that case.

Kerala HC bench slams Centre

During recent hearings, the division bench of the court comprising Justice Raja Vijayaraghavan V and Justice K V Jayachandran expressed sharp criticism of the Union government’s affidavit declining to consider a waiver.

Also read: Kerala: State to declare people missing in Wayanad landslide as 'dead'

The Centre’s position, as conveyed to the court, was that there is no existing legal provision under which it can direct banks to write off loans. The affidavit pointed out that the Disaster Management (Amendment) Act, 2025, had removed earlier clauses that authorised the National Disaster Management Authority to recommend relief in loan repayment or fresh concessional credit during major calamities.

It argued that any decision on waivers lies within the jurisdiction of individual banks, governed by the Reserve Bank of India's (RBI) norms and their own board policies.

The high court bench, however, said the Centre’s stand was "bureaucratic and evasive", observing that the government was relying on technicalities instead of recognising the human cost of the disaster.

'Centre failed people of Kerala'

“Please tell the Union government it has failed the people of Kerala,” the bench remarked, calling the Centre’s stance a “bureaucratic babble.”

It also questioned the rationale behind denying relief to Wayanad when loan waivers and ex gratia assistance had been sanctioned for other states affected by natural calamities in recent years.

“This is not a matter of charity,” the judges observed. “It is about ensuring that the victims are not pushed into destitution after losing everything.”

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The court said the right to live with dignity includes financial rehabilitation after a disaster and cannot be ignored on procedural grounds.

Pending a final decision, the court has stayed all recovery proceedings initiated by banks and financial institutions against the victims in the notified landslide-affected wards. It has also impleaded 12 banks, both public and private, as additional respondents, directing them to file affidavits indicating whether they are willing to consider full or partial loan waivers for affected borrowers.

Over 3,000 families displaced, agriculture hit badly

Official data submitted by the Wayanad district administration recorded over 1,200 houses fully destroyed and 2,500 partially damaged in the July 2024 landslides. More than 3,000 families were displaced. Agriculture, the mainstay of the region, suffered massive losses: paddy fields were buried, coffee and pepper plantations uprooted, and hundreds of cattle and goats perished.

Also read: Wayanad landslide, one year on: Scars remain, but hope endures

For women’s self-help groups that operated on small margins, these losses meant immediate default. Many of the group members had taken microloans for home improvements or to expand small enterprises under government-linked livelihood missions. With the collapse of both homes and businesses, their repayment capacity evaporated.

District-level banking committees have held several rounds of discussions but have so far limited relief to moratoriums and rescheduling of repayments. State authorities have recommended that the Centre treat the landslide as a “severe calamity” under national guidelines, a classification that would enable more substantial assistance, but no such notification has yet been issued.

State, Centre on collision course

The issue has since widened into a Centre-state dispute. The Kerala government, in an affidavit before the high court, stated that it had written to the Union finance ministry seeking permission to formulate a special debt-relief package but had not received a response.

The state has argued that without central concurrence, it cannot extend financial compensation for loans regulated by nationalised banks.

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The Union government maintains that loan matters are governed by the RBI and individual banks, and any blanket waiver would require fiscal resources beyond the state’s competence.

It has, however, sanctioned limited disaster assistance under the State Disaster Response Fund for rehabilitation and infrastructure restoration.

The high court will continue monitoring the case through its suo motu proceedings. It has directed both the state and the Centre to submit comprehensive reports detailing the rehabilitation status, pending claims, and financial liabilities of the victims before the next hearing.

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The bench has also asked the banks to explore a coordinated approach rather than isolated, case-by-case decisions.

For now, the court’s interim stay on recovery offers temporary relief to hundreds of affected families. But the larger question — whether disaster victims have a legal right to debt relief — remains unresolved. The case is expected to set an important precedent for disaster-related financial rehabilitation policy in India.