AGRICULTURAL CREDIT   

The emphasis on agricultural credit has been on progressive institutionalisation for  providing timely and adequate credit support to farmers with particular focus on small/marginal farmers and weaker sections of society to enable them to adopt modern technology and improved agricultural practices for increasing agricultural production and productivity.  The Government of India has taken many policy initiatives for strengthening the rural credit delivery system to support the growing credit needs of the agricultural and rural sections.  The policy essentially laid emphasis on augmenting credit flow at the ground level through credit planning, adoption of region-specific strategies and rationalization of lending policies and procedures. 

Institutional Arrangements 

                        Agricultural credit is disbursed through multi-agency network consisting of Commercial Banks (CBs), Regional Rural Banks (RRBs) and Cooperatives.  Cooperatives Institutions both the short and long term structure, have emerged over the years as the prime institutional agencies for dispensation of agricultural credit. In terms of network, coverage and outreach, the Cooperatives have a sizeable presence and play a significant role in meeting the credit requirements of agriculture. Cooperative have a vast network of outlets, which covers almost 100% villages in the country. In terms of network, coverage and outreach, the cooperatives account for 41% share in rural credit flow for agriculture, 31% in rural deposits and the small farmers constitute 44% of their total membership. 

Flow of Credit 

                                The flow of institutional credit for agriculture and allied activities has increased from Rs.31956,00,00 thousand in the year 1997-98 to about Rs.66771,00,00 in 2001-02. The total credit flow from all agencies during the IX Plan is expected to go up to be around Rs.233,700,00,00 thousand as against the projection of Rs.229,000,00,00 thousand. The total credit flow during the Tenth Plan has been projected at Rs.736570,00,00 thousand.  Agency-wise disbursement of Agricultural Credit from 1997-98 to 2001-2002 and projections for 2002-2003 is given in the Annexure. 

Weaknesses/Constraints: 

For several reasons, the Cooperative Credit Structure (CCS) is facing severe problems which have restricted its ability to function viably and perform effectively the task of reaching out to all segments of the farming community and meet in full their requirements of credit.  Limited ability to mobilize resources, low levels of recovery of the loans advanced, high transaction costs, frequent suspensions of recovery, administrated interest rates and externally imposed controls, have all affected the health of the system.  A number of measure have been initiated to ensure their growth and development and also make them strong, viable, vibrant, self reliant, dynamic and democratic.  However, these institutions have remained underdeveloped.  The impact of the externally imposed policy measures such as waiver of loans, the prevailing accumulated losses, imbalances, the insistence upon the adherence to prudential norms and the stipulation of Minimum Involvement etc., regulated interest rate regime, have left the cooperative credit structure in a very poor state requiring immediate initiate of steps for the rehabilitation. 

Recovery Performance 

                                The poor recovery performance of the cooperative credit institutions is a major bottleneck in the smooth flow of credit. Persistence of chronic overdues particularly at the grass-root level have caused poor recycling of funds from the borrowers to financing agencies. Stringent measures are underway to improve the loan recovery performance of the banks by creating a conducive recovery environment in their efforts in enforcing recovery. 

Policy Initiatives 

                        In order to revamp the Cooperative Credit Structure in the country, the scheme for their rehabilitation has been announced in the current year’s budget. A token provision of Rs.100,00,00 thousand has already been made in the Budget of Ministry of Finance for the year 2002-03 for this purpose. Department of Agriculture & Cooperation has also taken up the matter with the Ministry of Finance for expediting the process of implementation of the Budget announcement. 

Kisan Credit Cards

                        The instrument of Kisan Credit Card Scheme has been introduced to  provide adequate and timely support from the banking system to the farmers for their cultivation needs including purchase of all inputs in a flexible and cost effective manner. The scheme has made rapid progress with the banking system having issued more than 289.85 lakhs cards upto 31^st October, 2002. The personal insurance package to cover the KCC holders against accidental death or permanent disability, upto a maximum amount of Rs.50,000 and Rs.25,000 respectively as announced in the last year’s Budget has also be operationalised. 

Micro Finance Innovations  

                        Developing and promoting Self Help Groups (SHGs) and other micro finance institutions continued to be a thrust area during 2001-02. The issue of linking formal credit institutions with the rural poor through the formation of SHGs and intermediation by voluntary organisations is high on the agenda of improving banks, outreach and credit flow to the poor in an effective and sustainable manner. The National Agriculture Policy stipulates promotion of micro-credit as an effective tool for alleviating poverty and development of Self Help Groups (SHGs)- Bank linkage system as a supplementary mechanism for bringing the rural poor into the formal banking system. 

                        By 31^st March, 2002 the banks have provided access to banking services to over 78 lakh rural poor families through 4.61 lakh SHGs linked to banks. NABARD is working out the modalities to achieve the target fixed for SHG linkage for the year 2002-03. Over 90% of the SHGs are exclusive women groups. Almost 14,000 branches of over 300 banks (Commercial Banks, Regional Rural Banks and Cooperatives), more than 800 NGOs and many development agencies in the governmental and non-governmental sectors are involved in the SHG bank linkage programme. 

Rural Infrastructure Development Fund (RIDF)

                        Rural Infrastructure Development Fund (RIDF) was created in the year 1995-96 to boost public investment in the development of rural infrastructure. Eight tranche of RIDF has been announced so far with a total corpus of Rs.28500,00,00 thousand. The sanctions and disbursement under RIDF I to VII aggregated to Rs.25653,22,00 thousand and Rs.14849,73,00 thousand respectively as on 30^th November, 2002.

Central Financial Assistance  

                        In order to strengthen the Cooperative Credit Structure for meeting the credit requirement of the farmers, Central assistance is released to state governments under the scheme viz. Investment in Debentures of State Land Development Banks (SLDBs).   Amount allocated under the schemes and central assistance provided for the year 2002-2003 is as under:-
                                                                                (Rs. in thousand)

                     Under the Scheme, central assistance is provided to the State Land Development Banks/ State Cooperative Agriculture and Rural Development Banks, on the basis of proposals received from the National Bank for Agriculture andRural Development (NABARD).

                Besides the above scheme, a scheme on National Agricultural Insurance Scheme (NAIS) also continues. The allocation made under the scheme during 2002-03 is as under:- 

(Rs. in thousand)

Annexure

Annexure

Flow of Institutional Credit to Agriculture

To enlarge the coverage in terms of farmers (loanee and non-loanee both), more  crops and  more risks Government have  introduced a new scheme (in place of Comprehensive Crop Insurance Scheme-CCIS)  titled, ‘National Agricultural Insurance Corporation (NAIS) – (Rashtriya  Krishi Bima Yojna)’  from Rabi 1999-2000  season in the country.

The scheme is available to all the farmers – loanee and non-loanee both  - irrespective of their size of holding.  It envisages coverage of all the food crops (cereals, millets and pulses), oilseeds and annual commercial/horticultural crops , in respect of which past yield data is available for adequate number of years.  Among the annual commercial/horticultural eleven crops viz. sugarcane, potato, cotton, ginger, onion, turmeric, chillies, pine-apple, annual banana, jute and tapioca have already  been covered under the scheme.  All other annual commercial/horticultural crops will be placed under insurance cover in due course of time subject to availability of past yield data.

3.         The premium rates are 3.5% per cent (of sum insured) for bajra and oilseeds, 2.5% for other Kharif crops; 1.5 per cent for wheat, and 2 per cent for other Rabi crops.  In the case of commercial/horticultural crops, actuarial rates are being charged.  Small and marginal farmers are entitled to subsidy of 50% of the premium charged from them, which will be shared on 50 : 50 basis by the Central and State Governments.  The premium subsidy will be phased out over a period of 5 years.

4.         The new scheme is operating on the basis of ‘Area Approach’ i.e. defined areas for each notified crops for widespread calamities and  on an individual  basis for localised calamities such as hailstorm, landslide, cyclone and flood.    Individual based assessment in case of localised calamities is being implemented in limited areas, on experimental basis, initially  and shall be extended in the light of operational experience gained.  Under the new scheme, each participating State/UT is required to reach the level of  Gram Panchayat as the unit of insurance in a maximum period of three years.

5.         The Government have also decided to set up an exclusive organisation for implementation of the new scheme. 

6.         At present, the scheme is being implemented by the following 19 States and 2  Union Territories:

7.           Under NAIS, during the first five seasons i.e. from Rabi 1999-2000 to Rabi 2001-02 season (2-1/2 years), 216.49 lacs farmers have been covered over an area of 328 lacs Hectares insuring a sum amounting to Rs. 176662400 thousand.   Claims to the tune of about Rs. 14500000 thousand are paid as against the premium income of Rs. 5280000 thousand.  The season-wise coverage under NAIS is given as under :      

*     Claims reported

8.            The outlay for the IX Plan period was fixed at Rs. 730,00,00 thousand and         Rs. 1500,00,00 thousand have been provided for the X Five Year Plan.