Change in agro-credit approach needed, says Ex-RBI deputy governor Mundra

Attempts must be made to target the entire agricultural value chain financing: Mundra

S S Mundra, former deputy governor of the Reserve Bank of India (RBI), on Tuesday said public sector banks (PSBs) need to take a focused approach towards long-term agricultural credit and attempts must be made to finance the entire agro-value chain if India wants to improve the current state of affairs in this sector.

“Attempts must be made to target the entire agricultural value chain financing, rather than on a solo level. Measures like Kisan Credit Card, agri-insurance, e-connectivity and others are incremental in nature and are not game changers,” Mundra said at the annual general meeting of the Bengal Chamber of Commerce and Industries.

According to Mundra, the agro sector is plagued with lack of new capital formation, as the share of long-term credit declined to 32 per cent in 2013-14, from 74 per cent in 1990-91. 

The north and south zones together account for 62 per cent of the agro-credit, with the southern region alone accounting for 41 per cent of the total disbursement. Also, the credit in the sector is heavily concentrated, as only 15 districts of the total 600 districts in the country accounted for 21 per cent of the total credit.

“Some elucidation is needed to explain this concentration,” he said.

Mudra asked the PSBs to take a ‘hard look at their approach’ in rural areas.

He said the banks and the country’s policy framework needed to be friendlier towards micro, small and medium enterprises. 

This sector has the potential to create jobs at a time when it is estimated that around 69 per cent of the current jobs in India might be lost on account of automation.