Farm sector needs better credit facility

The banks in the nationalised, private and co-operative sectors are under the regulatory authority of the RBI which has statutory control under the Banking Regulation Act. While deciding the policy of loan disbursal and relevant facilities, there should be a sort of uniformity so that no sector is disproportionately benefited or neglected and the constituents of all sectors will have an equal opportunity to develop in their respective fields.

The banks focus more on the corporate sector in general and industries in particular, which are also pleading for facilities. Immediately after the budget, the bankers had approached the RBI governor with a demand to extend the period for restructuring of loans with regard to big accounts as also seeking credit from a consortium of banks.
The fact that such credit facilities are given to these sectors is itself indicative of the leniency as compared to other sectors in general and the farm sector in particular.

Banks have not considered various products and credit schemes for the farm sector as they have done in case of car loans, consumer loans as also loans to small and medium industries. Kisan credit cards and other products attracting clients in the farm sectors are either not specified or nor focused in the banks’ public announcements and public relations campaigns.

Limited relief
The significance of the farm sector is again stressed by policy makers as revealed in the recent budget. The amount of credit flow has been increased and the banks and financial institutions are expected to come forward with various products and schemes for the benefit of farmers.

This is more so because according to the new policy, the loan waiver scheme is modified in so far as those getting 25 per cent waiver and expected to pay the remaining 75 per cent, are now getting an extension of the period up to end of this year due to delayed monsoon and adverse effect on the current crop yield. But if the situation is so adverse and uncertain about the quantum of crop and cash value it may fetch, how is it possible for farmers to pay 75 per cent amount at one go even at the end of the year? This question is not considered either by the Union government or the RBI or the banking sector. Any relief is expected to be felt as relief by the beneficiaries and not as a conditional and partial ‘relief’.

The relief should be total irrespective of land holding as was the basic demand put forth by almost all political parties as also the farmers’ organisations. Payment of 75 per cent of the amount is certainly a burden in view of the uncertainty of both the crops and the seasonal market situations. Hence restructuring of farm loans is the right alternative and this should be considered by both the Union government and the RBI.

In fact, the bankers should have included farm loans for restructuring while demanding restructuring facility for other sectors and extending period for the same. What bankers have demanded is extension of period for restructuring of big loans. This means that such big loans are restructured whenever demanded by the concerned constituents and this practice is routinely followed by nationalised banks and other financial institutions.

Then why is this facility not given to the farm sector? Banking facility should not be the monopoly of a certain sector and bankers should extend all or similar facilities to all the constituents in the national economy. Agriculture should not be disposed of as insignificant while considering extending facilities and relevant services and concessions including restructuring of pending loans to the industrial or corporate sector. The RBI is expected to see that banks follow same or similar practices in deciding policy in sanctioning and restructuring of loans without any discrimination.

While the pending loans to be paid by farmers at the end of the year should be restructured if the farmers are unable to pay the total amount; and normal facilities which are given to other sectors should also be extended to the farm sector. If bankers change their mindset and consider the farm sector as much important as other sectors, they may come forward with various schemes in farmers’ interests. When that happens, the vast farming community’s depressed mood may also change for the better.

While the government has provided interest concession to farm loans, the same is also not found to be voluntarily extended by the banks without any hesitation or delaying tactics. Now that the government has been formulating policies favourable to the farmers, after realising the harsh realities of life in the rural areas and the significance of the farm sector, the  bankers also should take initiatives to respond to the government’s policy decisions without any hesitation.