An Assessment of Agriculture Credit at PNB
Agriculture plays a crucial role in the development of the Indian economy. It accounts for about 15.7 per cent of GDP and 52.1 per cent of the total workforce of the population is dependent on the sector, and despite a steady decline of its share in the GDP, is still the largest economic sector and a significant piece of the overall socio-economic development of India. The importance of farm credit as a critical input to agriculture is reinforced by the unique role of Indian agriculture in the macroeconomic framework and its role in poverty alleviation. Recognising the importance of agriculture sector in India’s development, the Government and the Reserve Bank of India (RBI) have played a vital role in creating a broad-based institutional framework for catering to the increasing credit requirements of the sector. Agricultural policies in India have been reviewed from time to time to maintain pace with the changing requirements of the agriculture sector, which forms an important segment of the priority sector lending of scheduled commercial banks (SCBs) and target of 18 per cent of net bank credit has been stipulated for the sector. The Approach Paper to the Eleventh Five Year Plan has set a target of 4.2 per cent for the agriculture sector within the overall GDP growth target of 8.2 per cent. In this context, the need for affordable, sufficient and timely supply of institutional credit to agriculture has assumed critical importance. The evolution of institutional credit to agriculture could be broadly classified into four distinct phases - 1904-1969 (predominance of co-operatives and setting up of RBI), 1969-1975 [nationalisation of commercial banks and setting up of Regional Rural Banks (RRBs)], 1975-1990 (setting up of NABARD) and from 1991 onwards (financial sector reforms). The genesis of institutional involvement in the sphere of agricultural credit could be traced back to the enactment of the Cooperative Societies Act in 1904. The establishment of the RBI in 1935 reinforced the process of institutional development for agricultural credit. The RBI is perhaps the first central bank in the world to have taken interest in the matters related to agriculture and agricultural credit, and it continues to do so (Reddy, 2001). The demand for agricultural credit arises due to i) lack of simultaneity between the realisation of income and act of expenditure; ii) lumpiness of investment in fixed capital formation; and iii) stochastic surges in capital needs and saving that accompany technological innovations. Credit, as one of the critical non-land inputs, has two-dimensions from the viewpoint of its contribution to the augmentation of agricultural growth viz., availability of credit (the quantum) and the distribution of credit. Project Objectives
An attempt to analyze the issues in agricultural credit in India. •
The analysis of the credit delivery mechanism to the agriculture sector.
Priority Sector Advances (Agriculture)- Direct and Indirect Finance 1.
What constitutes ‘Direct Finance’ for Agricultural Purposes? Direct Agricultural advances denote advances given by banks directly to farmers for agricultural purposes. These include •
Short-term loans for raising crops i.e. for crop loans.
In addition, advances upto Rs. 5 lakh to farmers against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months. •
Direct finance also includes medium and long-term loans (Provided directly to farmers for financing production and development needs) such as Purchase of agricultural implements and machinery, Development of irrigation potential, Reclamation and Land Development Schemes, Construction of farm buildings and structures, etc. •
loans to plantations, development of allied activities such as fishery, poultry etc and also establishment of bio-gas plants, purchase of land for agricultural...
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