The growth in credit flow to agriculture has been impressive and yet there are many serious issues that need to be addressed.
The credit flow to agriculture has crossed the target of Rs. 5,75,000 crore during 2012-13 fiscal. In-spite of increased credit flow to agriculture in the last few years, the growth under agriculture has been very lower Credit flow to farmers from banks in all four states like Karnataka, Andhra Pradesh, Tamil Nadu and Kerala is higher than other states. There is increased awareness about farm credit because of initiative taken by the government and banks.
Credit flow to farmers in south India is expected to be higher even this fiscal taking into account the past trend. Credit disbursement to farmers in northern India is also likely to be better than the previous fiscal.
Farm credit flow in South India rose to Rs 184,046 crore in 2010-11 from Rs 112,342 crore in 2008-09. Similary, credit flow to farmers in North India increased to Rs 115,636 crore from Rs 84,342 crore in the same period.
However, in north eastern region, credit flow stood at Rs 4,620 crore in 2010-11, lowest as compared to other parts of the country. Farm credit flow to farmers in western and eastern region increased marginally to Rs 62,804 crore and Rs 38,261 crore respectively in 2010-11.
The credit flow to small and marginal farmers has been increasing in the last few years, but assistance to tenant farmers (including share croppers, oral lessees)by formal financial sector need to be scaled up in the coming years to achieve higher growth in agriculture.
Credit flow to tenant farmers has been negligible even though banks are allowed to provide credit upto Rs 1 lakh by taking a declaration from Gram Sabha
Evolution of Farm Agriculture
The evolution of institutional credit to agriculture could be broadly classified into four distinct phases – 1904 – 1969 (predominance of co-operatives and setting up of RBI), 1969-1975 (nationalisation of commercial banks and setting up of Regional Rural Banks or RRBs), 1975-1990 (setting up of NABARD) and from 1991 onwards (financial sector reforms).
Existing Policies on Agriculture Credit
The Centre has taken several policy steps to improve the accessibility of farmers to the institutional sources of credit to enable them to adopt modern technology and improved agricultural practices for increasing production and productivity. Besides keeping specific credit flow targets for each year, the government has announced incentives for prompt repayments, concessional loans against negotiable warehouse receipts and credit facilities for farmers in drought affected areas and also for post-harvest.
Kisan Credit Card Scheme
To provide hassle free and timely credit to farmers, the government introduced the Kisan Credit Card (KCC ) scheme in 1998-99. The KCC scheme is in operation throughout the country and is implemented by Commercial Banks, Cooperative Banks and RRBs. All farmers including small, marginal, share croppers, oral lessee and tenant farmers are eligible to be covered under the scheme. As many as 11.5 crore KCC have been issued so far.
Interest Subvention Scheme
The interest subvention scheme was introduced in 2006-07 and has continued in the following years with certain modifications and changes in rate of subvention. For the 2013-14 fiscal, the government has continued the interest subvention scheme for short term crop loans up to Rs three lakh. The interest subvention of two percent / annum will be available to public sector banks, private sector scheduled commercial banks, cooperative banks and RRBs to enable these banks to give loans up to Rs three lakh at seven percent interest rate.
Network of Banks for Credit Disbursement
Three major channels for disbursement of formal credit include commercial banks, cooperatives and micro-finance institutions (MFI) covering the entire country. Presently, the government is disbursing agricultural credit through multiagency network Commercial Banks (CBs), RRBs and Cooperatives. There are approximately 371 District Central Cooperative Banks (DCC Bs) with 13327 branches and 31 State Cooperative Banks (SCBs) with 1028 branches providing primarily shortterm and medium term agricultural credit in the country.
The long term cooperative structure consists of 19 State Cooperative Agriculture and Rural Development Banks (SCARDBs) and 755 Primary Cooperative Agriculture and Rural Development Banks (PCARDBs) with 1219 branches and 689 branches respectively. Besides, there are 45957 rural and semi-urban branches of Commercial Banks, 14462 branches of RRBs and more than 7 million micro finance institutions.
Big Jump in Credit Flow in Last Few Years
The credit flow from various banks has improved in the last few years following several government measures.For instance, credit flow to farmers has increased many folds in the last nine years of the UPA government. Since 2003-04, the Centre has been announcing targets for credit to agriculture to ensure adequate credit flow to the sector. As a result, credit flow has increased from Rs 125,309 crore in 2004-05 fiscal to over Rs 600,000 crore in the 2012-13 fiscal.
Although credit flow to small and marginal farmers has been increasing in the last few years, but assistance to tenant farmers (including share croppers, oral lessees) by formal financial sector needs to be scaled up in the coming years to achieve higher growth in agriculture.
Tenant farmers face a range of problems, dominantly stemming from the lack of official recognition of tenancy and the fact that their status as actual cultivators is nowhere recorded. However, the government has made provision to ensure credit facility of upto Rs one lakh to tenant farmers with a declaration from Gram Sabha and without submitting any documents with banks.
As a result, the credit flow to this section of farmers has been able to increase marginally. In the 2012-13 fiscal, just 5 per cent of tenant farmers are estimated to have availed loan facility from banks.