The Hindu Business Line : Bankers circumspect on farm credit target

WHILE bankers have welcomed the Centre's proposals for boosting agricultural credit, they are circumspect about the sustainability of meeting the 30 per cent disbursement target year after year.

In the current year, banks are expected to disburse Rs 108,500 crore, exceeding the initial indicative target of Rs 105,000 crore.

In the Budget 2005-06, banks have been asked to increase the flow of credit by another 30 per cent in 2005-06 and also increase the number of farm borrowers by another 50 lakh.

"When the average rate of growth in agri-credit over the past decade has been 16 per cent, it will be difficult to sustain a 30 per cent disbursement target over the long term."

"Most banks managed to meet targets last year, because after a long spell they took some aggressive initiatives to boost credit to agriculture," said a banker.

However, as time goes by, the credit absorption capacity decreases and bankers will have to resort to the allied activities associated with agriculture to boost their disbursements, he said.

According to Ms Ranjana Kumar, Chairperson, Nabard, "The Budget has laid a greater thrust on allied agriculture activities, trading, skill upgradation etc."

"All this leads to additional employment generation, which is a major positive. The thrust now should be on the delivery mechanism which should be made more efficient, so all the proposals can be implemented within a set time-frame".

Commenting on the proposal to enhance the target for credit-linking of self-help groups (SHGs) to 2.5 lakh units from 2 lakh at present, Mr A.K. Khandelwal, Chairman and Managing Director, Dena Bank Ltd, said, "The importance placed towards the agriculture sector is welcome. Agriculture is not viewed as a loss making activity anymore. At the end of the day we can also see that the self-help group model is also doing very well".

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