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THE ELEVENTH PLAN STATES: “GDP PER AGRICULTURALWORKER IS CURRENTLYAROUND RS.2,000 PER MONTH, WHICH IS ONLY ABOUT 75% HIGHER IN REAL TERMS THAN IN 1950 COMPARED TO 400% INCREASE IN OVERALL REAL PER CAPITA GDP. While the income ratio between agri workers and non-agri workers during 1951 was 1:1.8, it got widened to 1:5.2 by 2004.
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SIXTH REPORT COMMITTEE ON AGRICULTURE- 22-04-10 (excerpts): |
Agriculture Credit: Commercial Banks, Cooperative Banks and Regional Rural Banks (RRBs) are major agencies, involved in disbursal of agricultural credit. The information about quantum of agricultural credit disbursed by Commercial Banks, Cooperative Banks and RRBs during the years 2007-08, 2008-09 and 2009-10, year-wise, agency-wise is as given below: |
| (Rs. Crore) Agency |
2007-08 |
2008-09 |
2009-10* |
| Commercial Banks |
181088 |
228951 |
186001 |
| Cooperative Banks |
48258 |
46192 |
38578 |
| RRBs |
25312 |
26765 |
23931 |
| Total |
254658 |
301908 |
248510 |
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* The information for year 2009-10 pertains to period
01 April 2009 to 31 December 2009. |
For the year 2010-11 the target of agriculture credit flow has been raised to Rs. 375000 crore from Rs. 325000 crore during 2009-10.
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Agency-wise and purpose-wise allocation of ground level credit flow target for Agriculture Sector for financial year 2009-10 is as follows: |
| (Rs. in crore) Agency |
Crop loan |
Term loan |
Total |
| Commercial Banks |
135,000 |
115,000 |
250,000 |
| Regional Rural Banks |
25,000 |
5,000 |
30,000 |
| Cooperative Banks |
40,000 |
5,000 |
45,000 |
| Total |
200,000 |
125,000 |
325,000 |
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“The Committee are perturbed to note that the existing system does not capture information about agriculture credit extended by financing agencies to their creditors. They, therefore, have some reason to share the common apprehension that large chunks of this credit may have gone indirectly to credit companies, agri-business companies, seed companies, etc and not to the small & marginal farmers who constitute the majority of farmers in the Country. The Committee would like DAC to obtain the considered views of the Reserve Bank of India and the Ministry of Finance on the instant practice in the light of prevailing apprehensions.” |
| Co-ops and RRBs failed in achieving credit targets |
Dr. C. Rangarajan Committee on Financial Inclusion has recommended providing access to institutional credit to at least 50% (55.77 million) of the excluded cultivator and non-cultivator households by the year 2012 and the remaining households by the year 2015.
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Co-operative Banks and Regional Rural Banks (RRBs), which are mandated to become the prime sources of institutional financing for rural credit have failed in achieving the annual credit disbursement targets. This being a matter of serious concern, the Committee desire that the reasons for the dwindling share of Cooperative and Regional Rural Banks in agriculture credit disbursement are analyzed in detail for formulating appropriate remedial measures. The Committee desire to be apprised of the action taken in this regard along-with the details of the action plan initiated or contemplated by the Government for brining the excluded farmer households within the ambit of institutional credit disbursement. (R 9-STANDING COMMITTEE ON FINANCE-10 Mar 2010)
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Commercial Banks fail to reach the mandated level of disbursing 18% credit to agriculture
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Lending to agriculture as a percentage of net bank credit has increased from 14.5 per cent to 15.4 per cent during FY2004-FY 2007. However, it has been lower than the target of 18% of net bank credit prescribed by Reserve Bank.
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Commercial banks, despite having a vast chain of branches in rural areas had continued to fail to reach the mandated level of disbursing 18% credit to agriculture. The shortfall in bank lending to agriculture in the year, 2007-08 was to the tune of as much as Rs. 21,818 crore.
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More disturbing was the fact that banks appeared to be averse to disburse credit to farmers despite the fact that the recovery of direct agricultural advances had been impressive and had been improving from 74.5% in 2004 to 78.6% in 2005 and to 80.1% in 2006 in the case of public sector banks. ( R 9-STANDING COMMITTEE ON FINANCE-10 Mar 2010) |
NOTE: CIFA in its study titled WATERING DOWN PRIORITY SECTOR ADVANCES -DEPRIVING CREDIT DUE TO SMALL FARMERS AND
TENANT FARMERS, brought out the following facts as to how the dilution and denial of credit to the poor is done. Based on the observations of the Standing Committees and the facts brought out by CIFA, Government and the RBI should initiate steps to ensure that 10% of the Bank credit is given to small and marginal farmers as recommended by the Sengupta Commission and Mandated 18% Agri credit is invariably given by Banks with provision for stiff penalties for defaulting Banks. |
“In 2004, the Finance Minister announced that extension of agricultural
credit was neglected in the past and declared that farm credit will now be
doubled in three years. |
Doubling of credit in three years since 2004 is achieved quantitatively
but without any increase in credit to small farmers and tenant
farmers. Up to 1993, only direct finance to agriculture was considered as
a part of the priority sector target of 18 per cent for agriculture and allied
activities. From October 1993, direct and indirect finances have been
considered together for meeting the priority sector target. About one-third
of the increase in credit flow to agriculture between 2000 and 2008 was
on account of the increase in indirect finance. The sharp growth in indirect
finance in the 2000s was mostly a result of changes in definitions effected
since late 1990s. These changes broadly involved:
(a) The addition of new forms of financing commercial, exportoriented
and capital-intensive agriculture; and
(b) Raising the credit limit of many existing forms of indirect
financing. Indeed, meeting the task of doubling agricultural credit appears
to have become much easier for banks as a result of these definitional
changes.
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The entire growth of indirect finance to agriculture in the 2000s
originated from a major expansion of loans with a credit limit of more than
Rs 10 crore, and particularly, more than Rs 25 crore. In the year 2000,
indirect finance with credit limit above Rs 25 crore accounted for less
than one-third of the total indirect advances to agriculture. However,
in 2008, indirect finance with credit limit above Rs 25 crore accounted
for nearly 55% per cent of the total indirect advances to agriculture. |
c. There was a major rise in the share of direct advances with a credit
limit of more than Rs 1 crore between 2000 and 2008. The amount of
direct advances with a credit limit of more than Rs 1 crore formed 5
per cent of total direct advances in 2000; the share more than doubled
by 2008 at 11 per cent. The share of direct advances with credit limits
“between Rs 10 crore and Rs 25 crore” as well as “above Rs 25 crore”
more than doubled between 2000 and 2008.
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d. Further, the most important beneficiaries of the increase in direct
advances since the late 1990s were the big borrowers. The share of
number of loans outstanding to big borrowers under direct finance
increased between the mid-1990s and 2007-08, and the loan per account
increased phenomenally since the late 1990s.All this happened at the cost
of reducing credit to small farmers. |
About 80% Small and marginal farmers own 40% of land but
small loans account for on 10% of the total agri advances.
Yet, share of Agri advances of Rs.1 Crore and above increased by
5 times (500%)”
- KRSR/160510 |
