Agri credit at subsidised rate is likely to go

RBI for timely loans at reasonable cost

Addressing a national seminar on productivity in Indian Agriculture, organised by CAB in Pune on Friday, RBI Deputy Governor K C Chakrabarty said, “Pricing of credit needs to be market-based to ensure effective flow of credit to all sections of the agricultural community.” He suggested that emphasis has “to shift from subsidised credit to timely and adequate credit at reasonable cost,” especially where credit delivery system is very weak and complex.

He pointed out that the Government of India provides 2 per cent subsidy on the short-term crop loan, while the short-term crop loan is available to farmers at 7 per cent. Chakrabarty also noted that it is important to carefully monitor the usage of credit right from the input to the output stage so as to ensure proper utilisation.

Further, he said monitoring of credit should not only be limited to crops but also to related activities that are funded by financial institutions like Nabard. In that context, RBI Deputy Governor suggested that the delivery of credit by co-operative sector need to be improved and Nabard should play a key role in converging credit services with other requirements that support agriculture and allied activities, including updating the farmers which help in facilitating completion of production cycles and ultimate value creation.

Although, schemes like Kisan Credit Cards have helped in improving credit linkage to farmers but we need to urgently look into ways to increase the supply of agricultural credit especially to small and marginal farmers, Chakrabarty noted.

At the same time, he said, there is a need to strengthen micro-insurance, particularly for small farmers to adequately weather vagaries of nature, which affect these farmers more adversely.  An institutional mechanism, he continued, to take care of marketing and storage risk is needed to improve farm productivity in the country.