Steps needed to improve disbursal of agriculture credit to needy: Assocham

Even though credit to agriculture has increased manifold over the past one decade, major reforms are still required to improve funds availability to the needy, an industry body has said. 

"It is not enough to raise the credit availability to agriculture. It is equally important to ensure that this credit goes to the needy and also disbursement has a correlation with the farming situation at individual and collective level," Secretary General of Assocham D S Rawat said in a study on Farm Credit. 

Increase in indirect credit, imbalances in credit between states and crops, misuse of interest subvention are eroding farm credit effectiveness, Assocham said. 

Between 2000 to 2010, farm credit increased over seven fold to Rs 3.9 lakh crore, a study by the chamber said citing RBI data. 

There has been a massive support from government to support farm credit in the last few years, it said, adding that "assuming the credit is effectively disbursed, this massive increase could be seen as a stabiliser and driver of the agricultural economy along with other factors". 

There has also been a further increase in provision for agri credit with each Budget. In 2011-12, it was Rs 4.75 lakh crore and in 2012-13, it was pegged at Rs 5.75 lakh crore. 

"...despite the massive increase in government provision of credit to the agricultural sector over the last one decade, the proportion of total bank credit to this sector in relation to the total bank credit remained more or less the same," it said. 

As per the Assocham study, disparities in loans to small, marginal and large farmers should be addressed and 'risk aversion' tendency of banks towards agriculture and specifically towards small and marginal farmers needs to be overcome. 

It has also underlined the need to reduce transmission costs, correct structural deficiencies in credit policy and quick resolution of credit worthiness issues. 

The industry body said despite the massive increase in credit to the sector, it was still inadequate considering the increasing intensity of farming, rise in output costs and energy intensive farming techniques.

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