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Agriculture Finance

One-Fourth of Farm Loans Given via Urban Branches

Mumbai: R Ramakumar, Agro Economist, Tata Institute of Social Sciences (TISS), said that, from 96,000 crore in 2004 to 10 lakh crore now, the flow of agricultural credit may have increased, and over the past decade about 18,000 new rural branches have been set up, and yet there is an agrarian crisis because of definitional dilusion as well as diversion of funds from the needy small farmers.

While speaking at AIBEA’s National Banking Conclave, he said that, it is ironical that one-fourth of the direct agriculture finance given to farmers in India is through urban/metro branches.

He informed that, in the case of West Bengal, the figures are even more striking where 55 per cent of direct agricultural finance is done through urban and metro branches, largely in Kolkata. This was followed by Maharashtra(37%) and Tamil Nadu(32%). 50 per cent of the agriculture credit is given in the months of January, February and March by which time the kharif and rabi crop seasons are over. No wonder farmers complain that they are being shut out of funds when they need them.

The financial inclusion agenda being followed now is not comparable in its impact, said Ramakumar, lauding the nationalisation of banks in 1969 and the subsequent policy initiatives on priority sector as genuinely helpful to agriculture.

He said that during the first decade after the reforms era in India, the share of moneylenders had increased from 17 per cent to 27 per cent, which meant that the share of rural credit from the formal sources and public sector banks stood reduced. He called the 1990s the lost decade of rural banking.

Quoting from the All-India Survey of Rural Debt, he said that the number of farmers who were indebted had risen from 25 per cent of rural households in 1992 to about 46 per cent in 2013. The debt-asset ratio of the farmers have been increasing over the years from 1.6 per cent in 1992 to 2.5 per cent in 2013.

He contested the common perception that there is a moral hazard with regard to farm loan waivers and argued that farmers are the most disciplined re-payers of loans.


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