Why would Sai Baba, a supposedly compassionate saint, push his devotee Kashiram into poverty by demanding so much Dakshina? Wasn't that cruel?

From the spiritual perspective presented in the texts, Maharaj's actions were an act of profound compassion, not cruelty. The source material frames this as a necessary 'Leela' to aid Kashiram's spiritual progress. Chapter 31 states that Kashiram's pride in being a giver was becoming an 'obstacle to spiritual progress.' It goes on to say that it is God's constant resolve to remove such obstacles from a devotee's path. Therefore, as explained in Chapter 32, the entire episode of demanding Dakshina until Kashiram was financially depleted was a targeted lesson to remove his pride. The moment Kashiram realized his own powerlessness and surrendered, his financial situation was restored, proving the lesson was about spiritual purification, not material punishment.