Direct lending to agriculture by credit institutions such as banks suffer from various anomalies, according to a farmers' forum.
The Centre has stipulated that 13.5 per cent of total loans advanced by banks have to be direct agriculture lending, “Credit institutions are, however, deliberately reporting higher disbursal of direct agriculture credit than what is actually given, possibly to the extent of 100 per cent in some cases,” said Mr Ajay Jakhar, Chairman of the Bharat Krishak Samaj, in a letter addressed to the RBI Governor, Dr D. Subbarao.
The letter comes within days of the Union Finance Minister, Mr Pranab Mukherjee, telling the Chief Ministers of the East Zone that banks have achieved 50 per cent of the target set for farm credit in the first half of the current fiscal.
In the Budget for the current fiscal, the Finance Minister fixed Rs 4.75 lakh crore as target for agriculture lending.
Elaborating his charges by pointing out to “information compiled from credible sources”, Mr Jakhar said people living in cities such as Delhi and Chandigarh have obtained agriculture loans worth Rs 32,000 crore during 2009-10. “Farmers in Uttar Pradesh, Bihar, West Bengal and Jharkhand received loans worth Rs 31,000 crore. This is unbelievable,” he said.
Though agriculture credit has increased, it has happened through urban and metropolitan branches of banks. “It is reported that agriculture loan disbursals from urban branches of banks have increased to more than 35 per cent of total agriculture lending,” the forum chief said.
Going by the letter, 52 per cent of farm loans disbursed in 2009-10 went to only Andhra Pradesh, Maharashtra, Delhi, Haryana, Tamil Nadu and Chandigarh. “For obvious reasons, this actually seems unlikely,” Mr Jakhar said.
Just 29 per cent of the credit is extended between June and September – the main season for kharif sowing. Another 24 per cent of loans is disbursed between February and March, a non-agricultural season but an ideal period to meet the Government target, Mr Jakhar said.
He regretted that the share of loans above Rs 25 crore had increased to 16.8 per cent from 5.7 per cent, extension of loans with a limit of Rs 25,000 had dropped to 13.3 per cent from 35.2 per cent during 2009-10.
According to the RBI data, agriculture lending by public sector and private banks dropped in share in priority sector lending during 2010-11. Public sector banks lent Rs 4.14 lakh crore last fiscal against Rs 3.72 lakh crore in 2009-10. However, in terms of lending in the priority sector its share dropped to 16.5 per cent from 17.9 per cent during the review period.
In the case of private banks, the actual lending increased to Rs 92,136 crore (Rs 90,737 crore) but the percentage in priority sector lending dropped to 15.7 per cent from 19.4 per cent.
Mr Jakhar also pointed out to a survey by Nabard that showed that non-interest and higher transaction costs imposed on farmers added another seven per cent to the interest cost of seven per cent, thus, doubling the total loan cost to 14 per cent.
“These raise the questions of appropriateness and veracity of agri-credit lending,” Mr Jakhar said and urged the RBI to conduct an audit on banks' agriculture lending.