• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources

Group Sites

• The Hindu
• Business Line
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

P. Devarajan

WHEN it comes to funding farmers, the co-operative banking system follows age-old limits termed in official parlance as Realistic Scale of Finance (SOF).

A detailed note sent out by the National Bank for Agriculture and Rural Development (Nabard) to State co-operative and district central co-operative banks says that "banks uniformly follow the scales of finance so prescribed without any discretion/flexibility and without due regard to the farm level realities, practices and costs, often leading to under-finance." When any sensitive banker tries to go beyond by using his discretion it becomes a matter of "irregularity/audit objection", while for corporates a similar helping is welcomed as it raises credit off-take.

Nabard has tried to make a change by vesting bankers at the base level with discretionary powers and also redefined the concept of Scale of Finance. In places where the District Level Technical Committees (DLTCs) have not met so far and revised the SOF for 2004-05, the Nabard has called for meetings to fix "realistic" SOF.

The SOF has to be fixed for all crops grown in the district i.e., kharif, rabi, summer crops with separate scales prescribed for irrigated and unirrigated crops, crops raised in a traditional manner using traditional seeds and crops raised under modern methods of farming using high yielding/ hybrid seeds/ tissue culture plantlets.

"Since the cost of cultivation for a farmer using traditional methods of farming and that for a progressive farmer using modern methods of cultivation will be different, it is desirable that the SOF may be fixed as a scale indicating the amount admissible as a range, the minimum being the requirement of a farmer using traditional methods of farming and the maximum of a farmer using capital intensive agricultural operations/ latest farming technology. It has been reported that in some cases, the family labour component which a farmer's family contributes is not taken into account while fixing the scale of finance," says the circular setting detailed ground rules.

The DLTC will have to compute the family labour component while arriving at the cultivation costs as required under the production-oriented system of lending. The DLTCs, which have revised the SOF for 2004-05, will have to revisit the limits while co-op banks have been told to instruct their managers to go by their understanding.

A broad limit of Rs 1 lakh per borrower has been suggested by Nabard, but there is no finality about the number. "This is not the final word on the issue," says a top source in Nabard. In fact, Nabard would like the three-tier co-operative credit structure to be compressed into two - the State co-operative banks and primary banks - with the district tier being knocked out. That could cut final the cost of funds to the farmer at the primary level as the three-tier system pushes costs by around 3 per cent to around 13-14 per cent.

If commercial banks play hard by pricing farm loans at around 10 per cent, which they should, they can pull away clients from the co-operative credit channels to build an excellent loan book. But the change could take a long time to come.

Simultaneously, Nabard has formed a core committee of banks with the permanent members being SBI, PNB, Indian Bank, Canara Bank and UCO Bank to discuss farm lending and try to come up with a one-page application form. Going by the number of meetings, committees, surveys, on-the-spot visits and phone calls on farm credit with New Delhi acting as the nodal point, the farmer can be said to be doing better in terms of words spoken.

Will the funds land in the hands of the farmer with the co-operative banking structure operating at the behest of politicians, some of whom are in the Union Cabinet?

More Stories on : Farm credit | Co-operatives | Insight | On Mint Street

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
SC panel for closure of Hind Insecticides unit — Proposes Rs 2.5-cr fine for polluting river

Copyright © 2004, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line