IBA wants agri credit flow doubled

Commercial Banks, under the aegis of the Indian Banks' Association (IBA), deliberated on the schemes that could be formulated so that the 10th five-year plan (2002-2007) target of Rs 7,36,570 crore lending to the agriculture sector is achieved.

In this regard the Vyas Committee's interim report on flow of credit to agriculture sector was discussed in detail.

Bankers felt that majority of the recommendations of the V S Vyas committee on agriculture credit could be met without much difficulty.

The committee called for an urgent need to double the flow of credit to this sector as there has been a severe shortfall in plan targets.

It suggested that all public and private sector banks should increase their direct lending to agriculture to 12 per cent of net bank credit within two years.and 13.5 per cent within the next two years thereafter.

With a 24.7 per cent contribution to the gross domestic product, agriculture still provides livelihood to about two-thirds of the country's population.

The sector provides employment to about 57 per cent of the country's workforce and is the single largest private sector occupation.

As any change in the sector, positive or negative, will have a multiplier effect on the entire economy, the central government is keen that banks step up lending to the sector so that the 10th plan target is met. The sector acts as a bulwark in maintaining the food security.

Besides lending to farmers for buying seeds, fertilisers, tractors, banks are keen on extending finance to the infrastructure "" irrigation, electricity, agriculture research, roads, markets, storage facilities, and transport "" allied to the agriculture sector.

The Vyas Committee has recommended that credit to small and marginal farmers should be progressively raised to 40 per cent of disbursements under the Special Agricultural Credit Plan (SACP) by the end of the 10th Plan period.

On new opportunities, it said there is a need for integration of investment credit and production credit. The banks can expand the flow of farm credit significantly if they consider total credit needs of cultivators.

Considering the new development in technologies and the need to adopt high quality inputs, the scales of finance need to be reviewed and revised to meet the credit needs of more capital intensive agricultural operations.