In order to ensure better credit flows into the agriculture sector, the government is working on involving formal and non-formal financial institutions. In simple terms, this means enabling non-banking finance companies (NBFC) and micro-finance institution (MFIs) to work in tandem for deeper penetration in rural areas of the country.
Talking to FE on the sidelines of FICCI-IBA 7th annual conference on banking in Mumbai, DN Thakur, director (agri credit), agriculture ministry, said, ?Though the quantum of agricultural credit has doubled in the past few years, only one-third of the farming community in the country still has been covered by the banking sector of the country?. Compared with four crore farmers who had been provided with agriculture credit until few years ago, the number has increased to Rs 12.75 crore currently, said Thakur.
Still, the harsh truth is that hardly 40% of the farmers have availed institutional credit and the rest (mostly MF/SF/SC/TF) are at the mercy of informal sources, he added.
?That is the reason we are looking at both the ways. On the one side, we are facilitating institutions like NBFCs and MFIs to penetrate more into the rural areas, whereas we want to allow the money lenders to continue their lending practices under the proposed regulatory environment so that they don?t charge heavily while lending,?? said Thakur.
?Actually, we feel that the money lending is normally done by those cash-rich farmers in the villages who know the pulse of the farmers? needs and are ready to lend money without checking any credit history of the borrowers. More than that, the next-door money lenders are ready to lend money at any time whenever the need arises. In fact, we look at it as the subsidising income earning opportunity,? said added.
However, Radha Singh, advisor, Ficci and former secretary at the Union department of agriculture, said, ?Agri lending is like high-risk business and hence banks are shy to go aggressively for it?. The success of agri lending depends on things such as a good rainfall. And at the time of crisis such as drought or any natural or even man-made disasters, agri-lending becomes a risk-prone area. Hence, the need of the hour was how to reduce the vulnerability of high-risk perception,? said Singh.
In fact, she favoured the creation of integrated supply chain to make agri-credit more accessible. Finally, Singh has advocated for efficient and localised financial intermediation.
