Strengthening co-operatives and involving private parties can help in improving productivity of agriculture sector, said Dr K.C. Chakrabarty, Deputy Governor, Reserve Bank of India.

Pricing of credit needs to be market based to ensure effective flow of credit to all sections of the agricultural community, said Dr Chakrabarty.

Speaking at the FICCI-IBA banking seminar, Dr Chakrabarty said that the share of agriculture in GDP has fallen to 14 per cent from 50 per cent about 15-16 years ago. The sector also provides employment for about 60 per cent of the population, he said. Therefore, food processing industry and agro-based industry need to be given necessary boost and impetus to improve productivity and employment opportunities

Dr Chakrabarty called for more granular data with regard to agriculture production — flow of credit to various segments and sub-segments of agriculture and storage activities, flow of credit in terms of outstanding and disbursements, number of beneficiaries and monitoring of credit with non-credit inputs.

Although agricultural credit has grown, it is from the urban and metropolitan branches of banks. This raises the question to which segments is this credit actually flowing to, Dr Chakrabarty pointed out.

“The share of rural credit in agriculture has come down from 55 per cent to 38 per cent. The share of metropolitan credit has gone up. But that will not add to productivity. We need to see where the credit is going” he said.

Little is also known about agricultural credit to various crops, horticulture, allied activities even on a consolidated basis, he added.

To improve the flow of credit, there is also a need for systematic co-operation between Regional Rural Banks and Primary Agriculture Credit Societies. Apart from improving credit risk, there is also the need for an institutional mechanism to take care of marketing.

Related Topics