NEW DELHI: Despite a record disbursal of the agricultural loans by banks to over Rs 24 trillion in FY24 against a target of Rs 20 trillion, regional disparity persists, according to latest data by Nabard.
The commercial banks, cooperative banks and Regional Rural Banks have disbursed Rs 24.84 trillion in 2023-24 under term and crop loans, a rise of 15% compared to FY23.
In the year, Rs 2.72 trillion of credit flow was to agri-allied sector – animal husbandry such as dairy, poultry, fisheries etc.
Over Rs 12.5 trillion (50.5%) was disbursed to five southern states — Andhra Pradesh, Telangana, Karnataka, Tamil Nadu and Kerala while the region had only 17% of the gross cropped area of the country. Efficiency in meeting loan parameters, better land records and the banks’ perception of creditworthiness are the factors that keep loans to farmers in southern states elevated.
Credit disbursal to Tamil Nadu was highest at Rs 4.39 trillion (17.6% of total country’s disbursal) followed by Andhra Pradesh accounting for Rs 2.96 trillion or 12% of the disbursal last fiscal.
Five northern states – Rajasthan, Punjab, Haryana, Jammu & Kashmir and Himachal Pradesh received about 15% of the total credit flow at Rs 3.74 trillion to agriculture and allied sectors against a gross cropped area of 20%.
The eastern region – Bihar, Jharkhand, Odisha and West Bengal received only 8.5% of the total agricultural credit flow at Rs 2.11 trillion in 2023-24 against the cropped area of 12%. The eight north-eastern states received agri-loans worth Rs 16,485 crore last fiscal, which was only 0.66% of country’s disbursement against having 3.2% of cropped area of the country.
To address regional disparity in agri-credit flow, officials said that Nabard is working with banks towards improving credit culture especially in eastern India by providing collateral in terms of social guarantee or a specialised fund and insurance products.
“However, despite growth in agricultural credit, there are institutional challenges such as region wise disparity in credit flow, lack of land records especially for share-croppers and tenant farmers and loan waiver announced by the state governments have led to a number of willful defaulters”, according to an official note.
To address regional disparities in the flow of priority sector credit at the district level, RBI has taken the initiative to rank districts based on per capita credit flow. The apex bank has stressed on building an incentive framework for districts with comparatively lower flow of credit and a dis-incentive framework for districts with comparatively higher credit flow.
According to an official note, in FY23, commercial banks had a share of 72% of the total credit disbursed which was followed by cooperatives banks (13%) and Regional Rural Banks (15%).
Under modified interest subvention scheme (MISS) of department of agriculture, farmers holding kisan credit cards (KCCs) are provided loans upto Rs 3,00,00 at 7% per annum for meeting their working capital requirement. Currently, out of 73.6 million KCC holders, 23.7 million belong to agri-allied sectors.
The scheme provides additional interest subvention of 3% for prompt repayment of the loan, thereby reducing the effective rate of interest to 4%.
The department of agriculture in FY24 has made provision of Rs 22,650 crore for FY25 under MISS to RBI while Rs 18,500 crore allocated for FY24 as per revised estimate.
An official note stated that within the total credit outgo to agriculture, the share of small and marginal farmers in the total number of accounts increased from 48.6 million (57%) to 116.6 million (76%) during FY15 – FY22. The total loan disbursed to small farmers rose from Rs 3.4 trillion to Rs 10.59 trillion during the same period implying that investment and capital formation are also progressive in the agriculture sector, it said.
Source: The Financial Express