Farm loan disbursements for the kharif season have fallen 30 per cent due to drought in a majority of the states.
According to the data with the National Bank for Agriculture and Rural Development (NABARD), the total credit to the agriculture sector till August 31 was close to Rs 1,10,000 crore, about 34 per cent of the total farm sector lending target of Rs 3,25,000 crore for 2009-10. The kharif season generally accounts for 60 per cent of the total agricultural loans.
Till July 31 this year, total short-term crop loan disbursement stood at Rs 74,900 crore, as against the annual target of Rs 2,00,000 crore. To meet their annual lending targets for agriculture, banks and cooperative institutions are looking at enhanced lending in the rabi season as well as restructuring of farm loans.
State Bank of India has announced a drought relief scheme for farmers taking minor irrigation and crop loans. Under the scheme, valid for kharif and rabi seasons 2009-10, the interest rate on new minor irrigation loans has been reduced to 8 per cent for the first year and to 9 per cent for second and third years for loans up to Rs 25 lakh. There are also concessions related to margin money requirement, moratorium and repayment tenure.
"In general, there has been about 30 per cent reduction in loan disbursements for the kharif season. In drought-declared areas, under the Reserve Bank of India (RBI's) guidelines, the short-term crop loans will be converted into medium-term loans," said an official at Nabard.
RBI has issued guidelines for relief measures by banks in areas affected by natural calamities. According to the guidelines, the principal amount of short-term loans as well as the interest due for repayment in the year of the occurrence of the natural calamity may be converted into a term loan with a restructured repayment period of between three and five years.
"We hope that in the rabi season, advances to the farm sector improve. We will be forging institutional tie-ups to step up lending to the sector," said VK Dhingra, executive director, UCO Bank.
There has been a wide gap between disbursement and the target in the cooperative banking sector also. Several cooperative banks are now looking at increasing the scale of finance, or the loan amount per acre. In West Bengal alone, the kharif loan disbursement in the cooperative sector between April and August this year was Rs 350 crore as against the target of Rs 600 crore. The cooperative banks are irked by the government's decision to cut the interest rate subsidy on farm loans by 1 per cent for this financial year.
Since 2006-07, the government has been providing interest subvention to farmers so that short-term crop loans up to a limit of Rs 3 lakh per farmer are available at 7 per cent per annum. The total financial implication for 2008-09 has been estimated at Rs.4,311 crore.
"Lending by cooperative banks has reduced because of inadequate support by Nabard and the government and it is becoming increasingly difficult for them to meet the lending targets from their own costly resources," said B Subrahmanyam, managing director, National Federation of State Cooperative Banks).
