M.S. Swaminathan, the architect of the National Policy for Farmers, and the Expert Group on Agricultural Indebtedness forcefully argued in 2007 for a change in the in the mindset of Institutional lenders. Balancing equity with discipline has been a formidable issue in farm credit defying proper response from the institutional credit agencies and the government alike.
Forty percent of total credit has been earmarked for priority sector and out of this target, 45 percent has to go to agriculture. At least 50 percent of direct farm credit was to go to small and marginal farmers (SMF). Number of accounts does not mean number of farmers as one farmer may have more than one account both in long term and short term credit. RBI statistics do not reveal how many farmers do have credit in their hands. It is appropriate to classify all the farmers in the size-holding of below 5acres as belonging to small and marginal farmers while the average production and income would vary depending on the nature of land – irrigated or dry. Viewing from this angle, 58 percent of the number of accounts held by the scheduled commercial banks under direct farm credit portfolio belongs to SMF. Although in terms of number of accounts, the SMF took a major slice, in terms of amount lent, the large farmers had their way. It ipso facto follows that the larger the outstanding in the larger farmer group, the larger would be the NPAs in this group compared to the SMF. The NPA statistics are not as revealing as the outstanding credit. One interesting feature is that INR 70000crores was the debt-waiver programme of Government of India announced in 2007 and therefore, the outstanding credit should show a decline to this extent, in the years that followed till June 2009. The reduction in the outstanding credit does not amount to a fraction of it. Where is this waiver parked? Between them, the marginal holdings account for those with less than 2.5acres. The average size of outstanding loan per farmer also increased with the landholding size (See Table 2). Outstanding credit implies unpaid principal and interest over and above the current year’s disbursements.
Disbursement figures reflect the actual amount disbursed during the crop year commencing June every year. Table 3 gives the trend.
Table 1: Direct outstanding credit – Short and Long Term
Credit to farmers -Size-holding wise distribution.- Numbers ‘000; Amount INR crores.
Period Up to 2.5acres >2.5acres-<5acres >5acres
No. of Accts Amount No.of accts Amount No.of accts Amount
1991 6137 2895 4346 2870 3563 6624
2001 4600(-25) 7215(149) 3689(-15) 7308(154) 3555(nil) 16963(156)
2006 8239(79) 29719(311) 6677(81) 29255(300) 6321(77) 52769(21)
2009 11708(42) 60199(167) 9570(43) 59792(104) 10884(72) 99349(88)
(Figures in parentheses represent variation over the previous year)
Table 2. Per capita credit outstanding - Direct finance to farmers sizeholdingwise Indian Rupees
Year up to 2.5ac >2.5-<5ac >5ac
1991 47172 66037 186329
2001 156847 198102 477159
2006 360711 438146 834820
2009 504169 624785 912798
Table 3: Direct Credit to farmers – ST and LT disbursements – Size-holding-wise
Distribution – Number of accounts:’000; Amount: INR crores.
June-end Up to 2.5 acres >2.5 acres -<5acres >5acres Total
No. of accounts Amount No. of accounts Amount No. of accounts Amount No. of accounts Amount
1983 1304 290 652 211 616 476 2571 977
1991 1960 1181 1219 952 899 1782 4078 3915
2001 2382 3740 1860 3642 1599 7135 5841 14516
2006 5004 16823 3670 17619 3670 32682 12344 67124
2009 8544 34267 6641 33280 6811 72753 21996 140330
Source: Hand Book of Statistics: Reserve Bank of India, Mumbai, 2011
78 percent of SMF accounts had a share of 54 percent of credit in 1991 whereas it was 45 percent accounts of SMF having just 48 percent of the direct credit disbursed for agriculture in 2009 despite per account disbursement improving from Rs.2561 in 1983 to Rs.44482 in 2009. This should be so despite the year-wise short term credit disbursement targets set by the GoI since 2005, speaks of the decreasing interest in this class of clientele. State-wise analysis reveals that 82 percent of the credit disbursed continues to be in just 11 States. Interestingly, year after year, there has been shortfall in meeting the target set for priority sector, particularly agriculture, that made the Banks cough up for the RIDF, a safe and inexpensive bet for them. Proper and effective flow of credit for agriculture and more particularly for the SMF and their even distribution in the country is of crucial importance for attaining the modest 4 percent growth in agriculture sector during the Twelfth Plan. There is need for a greater push and this should be engaging the attention of the newly formed Working Group on Priority Sector set up by the RBI recently.