A study by 3 academics on the impact of bank credit for agricultural sector reveals very encouraging trend:
A recent study to assess different types of loans available to farmers and the ratio of institutional credit to output for agriculture in India has revealed that the credit to agricultural sector increased from Rs462.68 billion in 1999-2000 to Rs18.63 trillion in 2023, which represents an annual growth of 19.5%. In financial year 2022, the study found the ratio of institutional credit provided to the total output in agriculture at 1.28, meaning the credit given was greater than half of the total output obtained in the fiscal year.
The study also found that in 2021 loans having interest rates of 4-5% got the highest disbursal. In 2023, as much as 75% of the total loan disbursal are higher rate loans (more than 7%) and lower rate loans got very less disbursal.
The study titled ‘A Study on Financing of Agriculture by Banks in India’ was done by 3 academics of Biju Patnaik University of Technology, Rourkela – Prakash Pradhan, Research Scholar, Dr Shakti Ranjan Mohapatra, Dean – Management, and Dr Deepak Kumar Sahoo, Ex-Director – Examinations, and was published in the Journal of Informatics Education and Research.
VARIETY OF LOAN PACKAGES
The study says a variety of loan packages are available from a few Indian banks to help farmers purchase necessary inputs including machinery, fertilizers, seeds and pesticides. These loans are frequently given out on favourable terms, with adjustable payback plans that take into account the cyclical nature of farming operations. Additionally, a few Indian banks have created customized lending programs to meet the unique requirements of farmers, like crop loans, which are short-term credit arrangements to help farmers finance their crop-growing endeavours. The banks also offer term loans for the acquisition of necessary infrastructure and capital goods. Banks are also known to be providing loans for related industries like horticulture, dairy farming and poultry business.
TIMELY FUND AVAILABILITY
The study brings out the favorable relationship between farm production and loan availability, with timely financing availability enabling farmers to improve agricultural methods and increase yields. Also, programs like interest subsidy plans and Kisan Credit Cards have helped increase farmers’ access to finance and advance agricultural growth.
The study also highlights how well programs like digital lending platforms, branch development and mobile banking reach the underprivileged rural communities and improve their access to formal financial services.
NABARD’S POSITIVE ROLE
The study emphasizes on the role played by NABARD to support agriculture and the rural economy starting from the early 1980s. NABARD among other things is credited for initiating several ground-breaking programs like the Kisan Credit Card launched way back in 1998. Through Kisan Credit Cards, farmers could get financial help, which, among other things helped shield farmers from unforgiving and unreliable creditors. The system also provides interest payment subsidies and crop insurance coverage. The Kisan Credit Cards are available to all farmers NABARD is also responsible for other initiatives:
- A scheme to foster dairy entrepreneurship development, which helped modernize dairy farms, calf raising, infrastructure provision and improve logistical operations to enhance the commercial value of the products,
- A program to create rural godowns, thereby helping farmers by increasing their holding capacity, allowing them to sell their goods at reasonable prices. Besides, the the implementation of a national-level warehousing system helped the farmers to sell agricultural products,
- Loan Against Warehouse Receipts, which helped prevent distress sale of agricultural produce, and solar schemes, which encouraged the adoption of solar technology and reduce the reliance on electricity.
ALL-ROUND GROWTH
The study says following the Green Revolution in the 1960s, the agriculture sector in the country has seen noticeable acceleration in production growth, driven
by intense input utilization and technical improvement, which was maintained during the 1970s and 1980s. It says the average production of foodgrains has increased dramatically, despite a slight slowdown in the early 2000s. This increase has been facilitated by increased agricultural credit, public and private investment, increased use of high-quality seeds and fertilizers, increased acreage under irrigation and increased cropping intensity.
One noticeable finding is that credit distributed to agriculture sector by cooperative banks has increased. “In the year 2019-20 it was Rs1573.67 billion and the target distribution achieved in the year 77.7%. The very next year the distribution jumped to 84.4%. The total amount distributed in the year 2020-21 is Rs1906.82 billion. In 2021-22 it has been the highest achievement – distribution of Rs2178.49 billion.”
The study says Bihar saw the highest level of distribution of credit, followed by Gujarat and Maharashtra.
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