Agriculture /
Rural Sector -Credit Flow - Where
are we headed in the next twenty five years.
Dinesh K Kapila,
Chief General Manager (Retd), NABARD.
The perspective
for the next twenty five years for any State in India presents a major challenge
as the scenario which would evolve in terms of technology, economic changes, demographic
profile, changing consumer trends and the consequent impact on production,
changes in the financial eco system and climate change are imponderables. For
example a scenario could evolve that in a hill
state short term credit could be
more in demand By FPOs and other such aggregators rather than limited to
individual farmers for crop loans. Fintech evolving in rural areas are also a
gray area in terms of evolution, growth and credit planning. However a vision
has to be evolved and a broad array of goals drawn up.
Then we can
disaggregate and draw up a plan for the next five years and thereafter project
in terms of the two decades to follow. The plan would encompass and indicate the
perspective for the next five years in any State and take into account the
following-
- the existing infrastructure and infrastructure
getting operationalized
- the Credit flow
by Banks and NBFCs and the trends across sectors Agriculture, Industry
Services, Exports, Urban Branches and Rural / Semi Urban Branches.
- the plans of
the State Government with specific reference to Agriculture inclusive of
Horticulture, Animal Husbandry, Fishery, Markets and Storage.
- the existing programmes
underway for development with support from multilateral institutions
- The Evolving
Industrial sector and the sectors such as Agro / Food Processing.
- the growth and
evolution of the rural and semi urban housing sector and social infrastructure
- Micro finance
trends and evolution. Plus loans from State Owned Corporations such as SC / ST
Corporations and Finance Corporations.
- Refinance and
Infrastructure Support (including watersheds / springsheds) by NABARD and their
perspective as shared by the State Focus Paper and District Plans. SIDBI also
in addition.
- Strengthening
of the credit dispensation institutions specially RFIs (Rural Financial
Institutions)
The pillars on
which the plan can be projected are and then subsequently reprioritized are -
- The Traditional
Agricultural sector and production oriented crop loan
- The traditional
investment credit activities such as Farm Mechanisation, Irrigation, Land Dev
etc
- Efforts as
regards small / marginal / tenant farmers
- The Advent of
Start ups and their impact. Incentivising exports.
- Encouraging
Agri Preneurs and specially the contribution by the Incubation Centres
- Initiatives
such as vertical farming near major metros and impact
- Trends in
improvement of productivity and production of crops including cotton etc and
mapping climate impact
- Initiatives in
Agriculture / Horticulture such as Replacing and Rejuvenation of the Aging
Fruit Trees or improving productivity of vegetable products or expansion of
area
- Improvement of
the Storage sector and Agro Processing Sector specially of rural markets and
basic processing sectors and cold stores
- Impact of the Central
Government Schemes viz of Saturation of KCCs AIF AHIDF and FPOs and the schemes
for MSMEs and Housing
- Strengthening
of the Animal Husbandry / Fishery Sector
- Technology
oriented protection agriculture, precision agriculture, micro irrigation.
The increasing
use of Biotechnology and its consequent enhancement of productivity. Moving
farm oriented labour to manufacturing / services and its outreach by way of
farm cum retail stores, rural health centres and education centres, effective extension
and through ACABC trained trainees, etc. Plus the level and quality of education
in n Agriculture.
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Frequently Asked Questions
Answered by Dinesh Kumar Kapila
1. What steps have been taken
by the government to improve the rural credit system?
The GOI / RBI / NABARD
undertake varied initiatives to enhance rural credit flow and improve it. The
GOI is the sovereign and hence plays the most important role. Quasi Sovereign
entities such as the RBI/NABARD supplement and facilitate the process.
The
computerization of PACS, digitization of land records, enhancing the
cultivation of oilseeds and pulses, funding from NABARD for Agri/Rural based
start-ups, natural farming, river linkage projects, water conservation - the Rs
10000 crore fund with NABARD, ENAM 1000 more Mandis, KCCs for fishery/animal
husbandry, etc. are some initiatives.
2. What are the problems of
agricultural credit?
The
preponderance of tenant/small/marginal farmers leads to insufficient credit,
reduced investments in land/farming, and non-viable operations, which impact
the ability to lend by financial institutions. Then overdue, whether by
drought/climate change/excess precipitation are, a gray area.
Institutional
coverage remains a concern in specific regions and is mainly addressed by
Commission Agents/Moneylenders. Alongside even where institutional coverage is
with depth and width, the social aspects are addressed by commission agents.
There could be a mismatch in terms of the actual requirements of farmers and
the actual sanctions. There could be sectoral issues too.
3. How are credit and marketing
significant for the process of agriculture?
Agriculture
credit is the prime mover and lever for crop loan operations and enabling due
to transportation to markets. It facilitates investments in land and farm
mechanization, land development, plantation, and horticulture.
4. Which source of credit is
better for farmers?
This is unclear; by logic, it
is crop loans from banks - commercial/cooperative / RRBs / SFBs. This attracts
interest subvention from the GOI of 3% on prompt repayment. Crop loans carry a
fixed interest rate of 7 % only up to a limit of Rs 3 lakh.
5. What is the current
situation of Agri fintech?
Fintech in the rural context is
still to be marked by a significant presence. This is largely concentrated in urban
areas. The enhanced availability of smartphones and internet/broadband services
could speed it up. It can only be a tap-off from Banks, considering the
interest subvention/concessions on specific schemes, if Banks extend credit.
Fintechs will be watched
closely as rural credit is complex and subject to political interventions in
case of aggressive marketing or recovery. More so, the irregularity of credit
flows is also a challenge.
6. What is the target of credit
flow to the agriculture sector during 2022-23?
Rs 18 lakh crore is the target
for this year, up from Rs 16.50 lakh crore.
KR
Expert - Dinesh Kumar Kapila
Former Chief General Manager at NABARD
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