The sharp increase in bad loans and poor availability of institutional credit in the agriculture sector are areas of concern, according to banking experts.

Mr B. A. Prabhakar, Chairman and Managing Director of Andhra Bank, has said that NPAs in the agriculture sector stood at a high 47 per cent. This would impede recycling of funds. “We need to evolve a strong recovery mechanism in this sector and create awareness on the need to repay the loans,” he said.

Addressing the 30th anniversary of National Bank for Agriculture and Rural Development (Nabard) here on Thursday, he said improving investment credit in this sector was a major challenge. Creation of a successful business model for financial inclusion programmes was also important. “We seek Nabard support in developing low-cost financial inclusion delivery,” he said.

Mr G. Gopalakrishna, Executive Director of Reserve Bank of India, asked Nabard to study the feasibility of evolving a two-tier system as against the three-tier system in order to improve credit flows.

Mr P. Mohanaiah, Chief General Manager of Nabard (AP), said one of the focus areas for the bank was to strengthen primary agriculture cooperative societies (PACS). “We need to bring farmers to closure to the market in order to reduce layers. This will result in increased incomes to the farmers,” he said.

Moneylenders

Mr D Srinivasulu, Principal Secretary (Industry and Textiles, Govt of AP), felt that the effort should be bring in competitiveness in rural credit distribution. “There is no point in replacing moneylenders who ensure quick delivery of credit in rural areas. What we should do is to bring competition (so that they reduce rates),” he told the bankers.

Mr Vadde Sobhanadreeswara Rao, former Agriculture Minister, criticised the banking sector for systematically reducing the number of branches in rural areas, while increasing the branch network in semi-urban and urban areas.

>kurmanath@thehindu.co.in

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