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Small farmers get raw deal
News:
According to an RBI report, small farmers get only 30-40% of agricultural credit meant for the farm sector.
Important facts:
- The priority sector lending mandate does not mention about the target of lending
- According to RBI rules, 18% of banks’ Adjusted Net Bank Credit should be provided to the agricultural sector. Small and marginal farmers should receive 8% of the total credit provided to the agricultural sector.
- Highlights of RBI’s Report
- Small farmers received only 42.2% of agricultural credit disbursed in 2016-17
- Rural-Urban Divide: Rural farmers received only 34.5% of agricultural loans outstanding as of 2017
- The burden of providing agricultural credit has been on public sector banks- In 2017, 12 out of 23 private sector banks failed to meet RBI’s lending target
- Disparity in performance between states: Example: Meghalaya gives 93.6% of its agricultural credit to small and marginal farmers. On the other hand, in Sikkim, agricultural credit provided to small and marginal farmers accounts for only 1.6%
- The data from RBI report highlights that the priority sector lending is poorly targeted. This problem of targeting arises out of lending costs.
- Banks tend to lend large farmers or farmers close to urban areas as the cost of lending is low.
- There is an urgent need to examine the priority sector lending mandates and bring necessary changes.
