Bangalore: It is
heartrending to see the poor farmers suffers as they don’t receive what is
meant to be for their benefit and this is not the first time that they face
such kind of situations.
The government
promises to provide them with various provisions like the agriculture credit to
purchase seeds and fertilizers as they need to implant the seeds before
monsoon. As the seeds and fertilizers are expensive small farmers cannot afford
to buy them and seek for financial support. So the question that arises is
where does all the promised support disappear?
According to the
research commissioned by the National Bank for Agriculture and Rural
Development (NABARD) it was noticed that the loans outstanding to the
agriculture sector stood at 3,00,000 crore between April 2009 and January 2010.
The agriculture shot up to 8, 00,000 crore at the end of March but it dropped
again to 3, 00,000 in April.
Prakash Bakshi,
Chairman of Nabard said, “We expected farmers to take 50 to 60 percent of loans
during the kharif season, but neither disbursement nor repayments have any
correlation with the normal cropping season,” as quoted by Economic Times.
According to Reserve Bank of India farm loans increased 755 percent to 3,
90,000 crore between 2000 and 2010. The 2012 Budget has further increased the
agriculture lending target to 5, 75,000 crore for 2012-2013.
Usha Thorat, former
Deputy Governor of RBI said, “For every unit of nominal GDP growth, there is
1.3 to 1.5 units of credit growth.” With this principle, a threefold rise in
agriculture credit should double the output but nothing like that can be
observed in the economy. Most of the banks which withdrew in nineties have
started lending again but a large portion of the money is not flowing in the
agriculture sector.
This is because of
the deteriorating economies of Indian agriculture as both banks and farmers
seem to be putting this money outside farming. Banks today look at agriculture
as problematic obligation. A senior rural banker, with a private bank in
Hyderabad, told Economic Times, “Not only is bad loans in the sector higher,
pricing of these loans is also abnormally low between them, our risk is not
adjusted well. Not to mention the ever-present risk of waivers.”
Banks just give out
agriculture loan as a matter of compulsion because RBI has made it mandatory
for all banks to lend at least 18 percent of total loans to agriculture. And if
the banks fail to do so are penalized by locking the shortfall for five years
in a fund that returns 4 to 5 percent a year. Therefore the banks indulge in
something called as ‘indirect farm credit’ in which they provide loans to the
companies that make farm inputs and to the non-banking finance companies that
then lend to the farmers etc.
The share of indirect
credit in agriculture lending has increased from 16 percent in 2000 to 24
percent in 2010, as reported by the steering group advising the Planning
Commission for the 12th plan. Some of the banks just put in fake numbers or put
extra numbers as the evidence for their lending during the annual meet to show
their targets. And some other banks lend to the farmers with a lower risk
profile, who have huge land holdings and are from prosperous states. The RBI
estimates state that the small and marginal farmers make up 83 percent of all
farmers and farm on 43.5 percent of agricultural land, but actually they
receive only 24 percent of bank credit. Nirupam Mehrotra , an Assistant general
Manager with Nabard, in an article ‘Agriculture Credit: The Truth Behind the
Aggregate Numbers’ points out that the rich areas receive credit that is
lopsided to their cropping area. South India reported that their cropping area
was 18.7 percent but their agricultural credit was 37.5 percent during the 11th
five year plan.
On the contrary,
Central and Eastern India accounted for 28 percent and 15 percent respectively
of total cropped area received just 13.2 percent and 7.3 percent credit. Banks
are also planning to distribute the increasing amount of credit from urban and
metro branches. So the small farmers are excluded from the credit benefit but
it is still unclear as to where is the money going? Planning Commission report
states, “Nearly 80 million farmers are still outside the institutional fold.”
Courtesy indolinks.com
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