Cash Credit (CC) norms for the agriculture sector should be brought on par with that for any other business as part of reforms in the agriculture sector, according to State Bank of India’s economic research report “Ecowrap”.

Currently, as per the asset classification norms for an agriculture cash credit (CC) account, a farmer has to repay the entire outstanding (principal along with interest) to seek fresh loans from banks unlike other segments of CC business where if the borrower has cleared interest payments, he/she would be eligible for enhancement/ renewal, the report said.

For example, in case of a ₹1 lakh loan, unless the farmer repays the Bank this amount along with the applicable interest, he/ she would not be able to either roll-over or become eligible for fresh loan or enhancement.

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“For a marginal farmer, it becomes difficult to lock his entire crop sales proceeds with the bank (till the loan is processed) to become eligible for fresh loan,”said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI. He underscored that a typical CC account for any business apart from agriculture, requires only the interest to be serviced to remain as performing cash credit account.

“This makes the farmers woes aggravated... a combination of livelihoods and agribusiness or value chain approach can help leverage the sector for betterment of its stakeholders – farmers, workers and others around it,” Ghosh said.

He said that the income from the agriculture depends upon the harvest of the crop. The marginal and small farmers do not have any other source of income other than the produce which is sold in the market to pay for their loan dues and to meet their subsistence expenses.

Ghosh said, “Around 44 per cent of the Indians are dependent upon agriculture which has just 16 per cent share in growth and currently growing only in the range of 3-4 per cent. So, if nothing is done for agriculture, this sector will continue to grow in the range of 3-4 per cent and the high number of dependents will lead to low per capita income. So, there is a dire need to focus on agriculture.”

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The report said there is a need for institutional innovations besides product, process and organisational innovations in the agriculture sector to deal with existing and emerging challenges and problems of sustainability in the sector which can be converted into opportunities.

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