Rural credit surge

| Updated on March 05, 2019

With reference to ‘Banks see upsurge in rural credit growth’ (March 5), the growing agrarian economy is a booster to rural employment, consumption, and demand. As the manufacturing and commercial sectors have sizable rural consumers any growth momentum in the rural space injects dynamism into the overall economy.

Though overall credit flow to agriculture is surging, it is crucial to guage how much of it is flowing to the small and marginal farmers, landless cultivators, and to the weaker sections of the rural economy. Low-cost institutional credit at times of need is still a distant dream for them and hence depend on the money lenders, who often charge exorbitant interest rates.

Banks and NBFCs usually prefer funding rich farmers as supervision of loans is easier.

In many areas, lenders extend loans against the security of gold or gold ornaments at rates prescribed for agriculture credit up to a threshold and report these loans as a credit to agriculture. Hence the mere surge in agriculture credit is not serving the desired purpose and the government and banking regulator must strictly ensure that the disbursement of funds to the agriculture sector really serves the intended purpose.

VSK Pillai

Changanacherry (Kerala)

Doubling farm incomes

Prime Minister Narendra Modi had set an ambitious target of doubling farm income by 2020 but there is no indication yet of that happening.

Despite bumper harvest, the income of our farmers is not rising, pointing to the structural problems afflicting the farm sector. If the prices of agricultural produce remain stagnant owing to economic slowdown and incomes among lower decile households (whose elasticity of demand for food is the highest), stagnate then the problem would be termed as episodic than structural and requires a fundamental review of our agriculture policy.

Agrarian crisis which now engulfs several regions of the country cannot be tackled by ad-hoc measures such as writing off farm loans and other populist schemes. Increase in farm productivity without a corresponding increase in the income affects our farmers badly. Time bound measures to effectively address the ills plaguing the Indian farm sector are of urgent need.

M Jeyaram

Sholavandan (TN)

Stressed assets for sale

With reference to news report 'Central bank puts Bhushan Power, Essar Steel assets to recover ₹3321 crore’ (March 4), this bank is the second bank after SBI to bring NCLT referred accounts for sale to ARCs, even though successful bids were concluded.

During the current quarter many accounts that were referred to NCLT, are now offered for sale to ARCs by the lenders.

The response received from the ARCs is not encouraging and SBI, in fact, had to shelve its auction plans with respect to one account, where the minimum bid amount that will be received through NCLT is also known.

The lenders pursuing with auction sales in respect of NCLT accounts and the lukewarm response received from ARCs thus far, are clear indications that the parties concerned no longer enjoy the confidence that the resolutions through NCLT will be speedier, even after completion of the bid process.

Unless corrective actions are taken, the legal remedy being sought through NCLT is likely to end up with inordinate delays and NCLT might well become one more forum for legal action, on par with DRTs set up in the 1990s.

V Viswanathan


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Published on March 05, 2019

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