Farm Financing: Works remain much more than the pouring of funds

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The number of banks working in rural regions has been around 47 percent. The financial inclusion drive is on. Banks are participating in multifarious ventures [farm and non-farm]. The regional rural banks have come forward. Private sector banks are also increasingly foraying into the rural counterparts.

However, a very recent NSSO survey reflected one major aspect of the agriculture scenario in India. The agricultural credit net [formal and informal, inclusive] has been able to cover only half of the farming community, and as such, a large number of small and marginal farmers are still out of the coverage of the institutional financial system.

What is more, the credit flow is more skewed across states and regions. Intrastate sharp variations in credit flow have been very much alive, with the main benefit going to the developed regions [regions with greater access to physical infrastructure and regions closer to the urban centers] as compared to the underdeveloped regions. It has been observed that due to a lack of penetration in remote areas, especially small and marginal farmers are largely still dependent on moneylenders for credit against collateral, and as such, the government’s agricultural credit schemes are far from their reach, making the farmers vulnerable to higher costs of credit. It has been observed that small farmers suffer from non-friendly practices, delays in credit delivery, and collateral problems.

No denial—to date, around half of the farmers are under the agri-credit net, and a lot thus remains to be covered. But does it not remain the fact that credit alone cannot help boost the rural economy?


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