Last fiscal, commercial banks had a share of 72% of the total credit disbursed, followed by cooperatives banks (13%) and RRBs (15%).
The government is likely to set agriculture credit target of Rs 22 trillion for the next financia year, up 10% from the current year’s target which may be overshot, sources said.
Of the current year’s farm credit target of Rs 20 trillion, the commercial banks, cooperative banks and regional rural banks (RRBs) have disbursed Rs 16.37 trillion, 81% of the target in the first three quarters of FY24.
“The credit demnd and disbursal for agriculture and allied sector have been encouraging,” an official said.
In FY23, the growth in agriculture credit was ‘robust’ with a disbursement of Rs. 21.55 trillion, 16% more than the target of Rs 18.5 trillion.
In FY23, Rs 1.19 trillion (12%) of agriculture credit was towards allied sectors such as animal husbandry, dairy, poultry, and fisheries out of total disbursal of Rs 18.5 trillion. In the current fiscal a sub-target of Rs. 2.93 trillion of credit has been set for the animal husbandry sector.
Last fiscal, commercial banks had a share of 72% of the total credit disbursed, followed by cooperatives banks (13%) and RRBs (15%).
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. Besides, loan waivers announced by the state governments have created willful defaulters, according to an official note.
In FY23, the agricultural credit flow to the southern region was 48% of the total disbursement while the region had only 17% of the gross cropped area of the country. Northern region received about 17% of the total credit flow to agriculture and allied sectors against a gross cropped area of more than 20%.
However, the eastern zone received only 8% of the total agricultural credit flow last fiscal against the cropped area of 12%. “North East, Eastern, Central and Western regions share in agriculture credit does not conform with the respective regions’ share in Gross Cropped Area due to limited credit absorption capacity,” the note stated.
It has also identified factors such as limited outreach of financial institutions, lack of financial literacy and infrastructure bottlenecks for regional disparity in the credit disbursement.
According to officials, 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, the note stated.
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 FY23 had released Rs 17,997 crore under MISS to RBI and Nabard against the revised estimate of Rs 19,700 crore for 2022-23.
Source:financialexpress.com