Small farmers get raw deal

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:

1. The priority sector lending mandate does not mention about the target of lending
2. 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.
3. 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%

4. The data from RBI report highlights that the priority sector lending is poorly targeted. This problem of targeting arises out of lending costs.
5. Banks tend to lend large farmers or farmers close to urban areas as the cost of lending is low.
6. There is an urgent need to examine the priority sector lending mandates and bring necessary changes.