Continued neglect of farm credit during 2007-08 also
The RBI has today released its Annual Report for the year 2007-08.From the data provided therein, it is observed that additional credit extended to agriculture during 2007-08 ,declined to Rs43,260crore compared to a growth of Rs56,426crore during the previous year. The agricultural sector was given only 11 per cent of the incremental non-food bank credit expansion as compared with 14 per cent in the previous year where as a whopping 43 per
Cent of incremental non-food credit (y-o-y) was given to industry as compared with 37 per cent in the previous year. Credit was obviously directed to industrial sector diverting from agricultural sector. It is unfortunate that credit to essential sector like farm sector is continuously decreasing and no effective measures are taken by the RBI and the Government to ensure that banks extend credit to the mandated extent of 18% of net bank credit. The figure is hovering around 12% to 15% for more than a decade; and continues to be below 18% even after the government declared in 2004 that Agriculture credit is their priority. Lending to agriculture by banks, both in the public and private sectors, continued to fall short of the stipulated target of 18 per cent. Had credit been extended up to the stipulated norm of 18%, farm credit would have been Rs 50,000 crore more than the actual increase of only Rs43,260 crore and additional loaning would have been Rs 93,260 crore , by March 2008. If the trend of rural credit deposit ratio in rural areas is the same as last year i.e.; 56%, then large amount of deposits collected from rural areas would have continued to be diverted to metro areas thus depriving of benefit required credit to rural areas.
It is another matter that a major portion increase in agri loans is on account of disproportionate increase in indirect loans and big loans of Rs one crore and above. Referring to the growth rate in agricultural credit in the last few years (after 2000) Prof.M.S.Swaminathan recently said at Chennai on the 26th Aug that "it originated primarily from a growth in indirect finance to agriculture i.e. credit given to institutions and organisations that contribute to agriculture but not the credit given directly to agriculturists.""Between 2001 and 2006, direct finance to agriculture grew at 17.4 per cent but indirect finance grew by 33 per cent, he said. Even in the case of direct finance, the major rise in direct advances happened where the credit limit was more than Rs 1 crore."
He underscored the critical importance of agriculture, stating “we can’t live happily as islands in a sea of misery”. Calling farmers the guardians of national food security, he said that it was their efforts that had enabled the country to have a buffer of about 25 million tonnes of wheat and 30 million tonnes of rice. He also reiterated that "the minimum support price offered by the Government to farmers must cover their costs and offer at least 50 per cent more as against the current levels of 15 per cent above cost price"We urge upon the RBI and the Government to ensure that credit is extended to essential farm sector to the extent of 18% of total credit and Agri prices are fixed as recommended by the NCF headed by Prof.M.S.Swaminathan.Continued neglect of credit and underpricing of agri produce is not in the interests of the nation's food security and the farmers.
