Agricultural Credit in India: An Overview (original) (raw)
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Agriculture Credit in India: An Analytical Study
This paper examines the concerns and issues in agricultural credit in India. The analysis states that the credit delivery to the agriculture sector continues to be insufficient. It appears that the banking system is still hesitant on various grounds to provide credit to small and marginal farmers. Transformation in banking policies and practices and the resultant of and access to total bank credit during the post-bank nationalization period have not satisfactorily addressed equitable and efficient delivery of agriculture and rural credit. Due to declining in public capital formation in the rural and agriculture sector and the persistent unenthusiastic attitude of rural bankers towards formal financing, the planners and policymakers are believe on microfinance to suitably supplement formal banking in rural India.
Agriculture is the backbone of Indian economy. So it has all along been treated as a priority sector for the allocation of the institutional credit. The agricultural credit, particularly the institutional credit, has been to play a significant role in the agricultural development of India. Various institutional agencies are engaged in the payment of credit to agricultural sector i.e. scheduled commercial bank, regional rural banks, co-operative credit societies, co-operative banks etc. with their vast network, wider coverage and outreach extending to the remotest part of the country, the co-operative credit institutions, both in short and long term structure are the main institutional mechanism for dispensation of agricultural credit. An attempt has been made in the present paper to analyze the position of agricultural credit in India.
Agricultural Credit Policy in India -Need for Shift from Supply- Led To Demand-Driven Credit
In pursuance to the recommendations of the All India Rural Credit Review Committee [1969] the Government of India directed the nationalized banks including the State Bank Group & later on private sector commercial banks to finance farmers in order to significantly increase food output in particular and substantially raise agricultural growth rate in general. Government, also, adopted a multi-agency approach involving vast rural network of cooperative credit institution and regional rural banks. From time to time the Government introduced a plethora of directives virtually regulating the banks beyond one can expect. In the process, approach to agricultural credit policy in India and many developing countries since the 1960s has been " supply-led rather than demand-driven " which of course facilitated farmers to usher in Green Revolution. However, over a period of time this approach resulted into large-scale over dues building huge amount of non-performing assets, making banks financially unviable and forcing the Government to recapitalize them, among others. In this context, this development perspective article attempts to briefly highlight pertinent aspects of supply-led approach and suggests the immediate need to search & reinvent the agricultural credit delivery approach emphasizing demand-driven
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Agriculture is the lifeline of majority of the people in India. It accounts for about 19 percent of GDP and about two thirds of population is dependent on the sector. In view of this importance the Government and Reserve Bank of India (RBI) have played a important role in setting up a broad based institutional framework for catering to the credit requirements of this sector. The policymakers over the past years increased the institutional sources of credit but neglected the qualitative aspect of credit delivery system. Agricultural growth in terms of major crops has witnessed a deceleration despite jump in quantity of credit delivery. The major challenge of the policy makers is to reverse the trend of deceleration in agricultural growth. Such a deceleration is directly associated with the declining of public investment in R&D, fragmentation of holdings, lack of infrastructure, obsolete technology and improper input pricing policies of the government. Hence the crisis of agricultural stagnation needs urgent attention and rigorous treatment on the part of planners and policy makers. Given this macro scenario, the study attempts to analyse the trend and growth of flow of credit to agriculture both in pre and post reform period. The study based on secondary sources of data compile from several sources and these data revealed that structure of credit outlets has witnessed a significant change and commercial banks have emerged as the major source of institutional credit to agriculture sector in the recent past few years. But the declining share of investment credit in total credit may constrain the growth of agriculture in India. This alarming situation calls for serious efforts to augment the flow of credit to agriculture.
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Hill agriculture of Uttarakhand state characterize by fragmented and very small size of average holding of 0.40 ha, low input-low output production system largely dependent on rains and low risk bearing ability of farmer. Most of the farmers in 11 hill districts out of 13 in Uttarakhand state were able to produce food grains, which was adequate only for three to six months of their family requirements. Because of poor resource base they were unable to exploit the market opportunities arising due to changing economic environment. Agriculture credit can break the vicious cycle of poverty if effective credit support was available to farmers to diversify and modernize their agriculture. Experience indicates that many farmers do not come forward to borrow from institutional credit agencies and thus practice internal credit rationing. Evidences also indicate that many farmers did not get institutional credit in adequate quantity, at right time, at reasonable cost while many others did not...