As many as 31% of rural households in India are indebted and a significant number still depend on money-lenders, paying heavy interests, despite various government schemes and a network of rural banking.
A parliamentary panel that probed the state of rural, agricultural banking found that a mere 17% rural household had taken loans from financial institutions, highlighting the extent of financial exclusion despite pumping Rs8.77 lakh crore between 2006-07 to 2015-16 in the name of agriculture credit.
The panel found that not only education and occupation, but caste affiliation and gender also play part in rural areas to get access to the banking systems.
The phenomenon explains the mess in Indian agriculture which has registered lowest 1.2% growth and contributes just 15% to the national GDP, despite over 58 per cent of the rural households depending on the sector as their principal means of livelihood.
The 31-member panel led by senor Congress parliamentarian Veerapa Moily revealed that 40% famers having higher assets have taken loans from the financial institutions, and the bottom 30% households, including landless agriculture labour, have taken loans from the non-financial institutions. Ironically the poor farmers depending on non-financial institutions are paying an interest at the rate of 20 to 37% , against rich farmers, who pay at the rate of 6 to 15%. While 20% or rural loan is now disbursed through the Kisan Credit Cards, a positive development, the share of medium and long term loans through institutional financing mechanisms is declining, reaching to a mere 28%. The parliamentary committee said despite reforms undertaken at the higher levels, at the grass-root level, banks were still insisting on more collateral making it cumbersome for poor farmers, who find it easy to access to money lenders, where there is no procedure.
Another disturbing trend has been disbursing agriculture credit during the last months of financial year to show results. "This is not the time for taking credit, this is the harvest season and so the time for farmers to prefer to repay loans instead of taking new loans," said the panel in its report.
The panel also found that priority loans advanced in urban areas have also been camouflaged as agri-credit, raising a well-founded apprehension that the actual credit needs of farmers for cultivation including pre and post-harvest operations directly linked to farming were not being adequately met. The obliteration of the distinction between direct and indirect lending to agriculture has risked marginalised peasants from the credit scenario, even they constitute a bulk of farming community.
The Committee said the interest subsidy for farm loans was meaningless unless the disbursal mechanism was not made accessible, simpler and beneficiary friendly. "Once the access becomes simple and easy, the reliance on non-formal channels of credit can be expected to diminish," the report added.
Make process simpler: Panel
The Committee said the interest subsidy for farm loans was meaningless unless the disbursal mechanism was not made accessible, simpler and beneficiary friendly. "Once the access becomes simple and easy, the reliance on non-formal channels of credit can be expected to diminish," the report added. Summing up its recommendations, the panel has asked the government to tailor its schemes that includes crop insurance policies, rural credit etc in a manner to lower the costs of farming and raise farm revenue and thereby increase farmer's incomes.
