Only 35% of the total farm credit goes to farmers

By Hindustan Times on 13 Apr 2017 | read

09 Apr 2017

Not more than 35% of the total agriculture loan is directed to small and marginal farmers though they hold more than 70% of the country’s farmland, banking sources said.

A large number of these farmers still take loans from money-lenders and not from the formal banking channel, resulting in farmers’ suicide and distress.

Recently, the Uttar Pradesh government led by chief minister Yogi Adityanath in Uttar Pradesh decided to waive off crop loans of up to Rs1 lakh of small and marginal farmers in the state, as part of its poll promise.

However, bankers said many distressed farmers might not even benefit from this move.

Reserve Bank of India governor Urjit Patel, while announcing the monetary policy, said, “Waivers undermine an honest credit culture... It leads to crowding out of private borrowers as high government borrowing tends to impose an increasing cost of borrowing for others,” Patel said.

According to a State Bank of India report, the total outstanding credit by the scheduled banks in 2016 for agriculture sector stood at Rs86,241.20 crore in Uttar Pradesh, with average ticket size of Rs1.34 lakh.

Finance minister Arun Jaitley while presenting the Union Budget on February 1 increased the total agriculture loan target by Rs1 lakh crore to Rs10 lakh crore for 2017-18.

While the state-owned banks have managed to meet agriculture loan targets set by the government every year, the chunk of the low interest credit goes to the rich farmers.

“Waiving off loan amounts can bring in short term relief but there has to be a strategy in place to ensure that loans reach them and their dependence on money lenders in minimised,” a senior public sector bank official, who did not wish to be identified said.

“Efforts should be made so that the farming community is covered by formal banking system so that they can easily avail of crop loans,” Soumya Kanti Ghosh, chief economic adviser, SBI group told HT.