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When the massive landslides tore through Mundakkai and Chooralmala in Kerala’s Wayanad district in July 2024, they did more than wipe out houses, plantations, and livelihoods.
They also destroyed the fragile economic foundations on which hundreds of families had built their future. Land, cattle, crops, small businesses, and life savings were buried under tonnes of mud. But one thing survived intact—the debt.
Almost two years after the disaster, many survivors are still receiving recovery notices from banks. Families that had lost everything were being asked to repay loans taken for tractors, cows, rubber cultivation, pepper vines, shops, and houses that no longer existed. With no land, no income, and no assets, they were being pushed into a second disaster, this time financial and legal.
It is in this moral and administrative vacuum that the Kerala government’s decision to take over and clear the outstanding bank loans of Wayanad landslide survivors becomes historically significant.
The state cabinet has approved the takeover of 1,620 loans taken by 555 affected individuals, amounting to about Rs 18.75 crore, to be paid from the Chief Minister’s Disaster Relief Fund. By doing so, Kerala has effectively assumed private household debt as a public responsibility. This is an extraordinary move in Indian disaster governance and almost unprecedented in its directness.
This is not merely a relief measure. It is a structural intervention in the political economy of disaster rehabilitation.
The decision follows a prolonged legal battle in the Kerala High Court, in which survivors approached the court after banks initiated recovery proceedings. The High Court stayed all recovery action and strongly questioned the Union government’s refusal to grant loan waivers or recommend relief under the National Disaster Management framework.
The Centre told the court that amendments to the Disaster Management Act had removed earlier provisions that allowed it to recommend loan relief. In simple terms, the Union government argued that the law no longer empowers it to intervene in private debt matters, even in catastrophic disasters.
This legal position may be technically correct, but it produces a deeply disturbing outcome. A state devastated by a climate-induced disaster is told that no constitutional or statutory authority exists to protect survivors from debt enforcement.
The High Court’s observations were unusually sharp. It noted that disaster management cannot be reduced to distributing compensation while leaving victims to face banks, courts, and auction notices.
Kerala’s intervention therefore fills a legal and ethical vacuum created by the Centre’s abdication.
Environmental activist Sreedhar Radhakrishnan, who has closely tracked disaster governance in Kerala, sees the decision as necessary but long overdue. He argues that India urgently needs a comprehensive national disaster compensation law, on the lines of the Land Acquisition Act, with legally enforceable rights for victims.
“This is a welcome decision, but it is very late. Power equations and political games delayed it for almost two years after the Wayanad tragedy. The mental tension created by this delay is unparalleled. People were living under constant fear, not knowing whether they would lose even the little dignity left to them,” he said.
To understand the importance of this decision, one has to understand how debt functions in disaster recovery. Globally, debt is one of the most powerful but least discussed obstacles to rehabilitation.
Compensation for lost houses, even when paid on time, is rarely sufficient to rebuild livelihoods. Families need fresh credit to restart agriculture, rebuild shops, purchase equipment, relocate to safer land, or begin new occupations. But once banks initiate recovery proceedings, survivors are locked out of the credit system. Their credit scores collapse. They cannot borrow again. They cannot invest. They cannot move forward. In Wayanad, educational loans taken by affected families for their children was another matter of concern. Wayanad farmers give lot of importance to the education of their wards.
In Wayanad, the debt trap remains especially severe. Most affected families were marginal farmers, plantation workers, or self-employed rural households. Their loans were modest in absolute terms but vital to their survival. After the landslide, their collateral vanished, their income collapsed and their repayment capacity disappeared. Yet interest continued to accumulate and legal notices continued to arrive.
For many survivors, the psychological toll of debt was as devastating as the physical disaster. “We are happy, though it came very late. The Union government was adamant. We had to seek court intervention to stop the banks,” said S Sabitha, one of the affected women who approached the Kerala High Court seeking loan write-off.
“Women are the real sufferers of indebtedness. When families lose everything, it is women who carry the burden of managing households under constant financial pressure. Banks must behave like caregivers in disasters, not like usurers.”
R Vineetha, another survivor, said the government declaration restored her mental peace after months of trauma. “This decision saved many of us from suicide. Recovery notices were giving us sleepless nights. Even people who died in the landslide received recovery notices. Imagine the cruelty of that. We were already grieving and suddenly we were being threatened with legal action,” she said.
Without debt relief, rehabilitation becomes economically impossible. Every rupee of state compensation would simply go towards servicing old loans instead of rebuilding the future. Debt turns disaster victims into permanent economic refugees.
This is why Kerala’s decision is not symbolic. It is economically decisive.
Internationally, disaster debt relief usually follows very different paths. In some cases, countries receive sovereign debt relief from international institutions after major catastrophes, as Haiti did after the 2010 earthquake. But this operates at the level of governments, not households.
In other cases, financial regulators instruct banks to provide moratoriums, grace periods, interest waivers, and flexible repayment schedules. Japan after the 2011 tsunami and the Philippines after Typhoon Haiyan followed this approach. This protects borrowers temporarily but rarely erases their liabilities.
There are also pre-arranged disaster financing models, such as catastrophe bonds, insurance pools, and contingent credit lines, increasingly used in parts of Europe, Latin America, and Southeast Asia. These allow governments to access funds quickly without ad hoc bailouts, but again they do not directly address household debt.
Even in the United States, where federal disaster loan forgiveness occurred after hurricanes like Katrina, it took years of political struggle, litigation, and partial settlements.
Kerala’s action stands apart because it is immediate, household-specific, state-funded, and unconditional. In global disaster governance, this places Kerala closer to a welfare-state logic than a market-adjustment logic.
What Kerala has effectively done is redefine disaster relief as a question of social protection rather than charity. By assuming debt, the state restores survivors’ access to credit, prevents legal dispossession, protects credit histories, and enables genuine livelihood reconstruction.
Sharath Cheloor, who led the collective struggles of Wayanad survivors demanding loan write-off, believes the decision must now force a national rethinking. “This should prompt the Union government to evolve a national model for disaster survivors across India. Mounting debts and interest are pushing people towards death, on top of the trauma of losing family members and homes. Once debts are written off, people can actually rebuild their lives. Their economic freedom is restored, and that is the foundation of any real rehabilitation.”
In federal terms, this is also politically significant. A sub-national government has acted where the Union government claims legal incapacity. This sets a precedent that states need not wait for central permission to innovate in disaster justice.
In that sense, this becomes another entry in what has historically been described as the ‘Kerala model’. Earlier, the Kerala model was about literacy, land reforms, and public health. Today, it is extending into climate governance and the political economy of disasters.