Iba Group For Hiking Credit Limit To Farmers

The Indian Banks' Association (IBA) group on agriculture credit under the chairmanship of B Samal, which was set up to look into ways of increasing cash flow to the agricultural sector, is considering a proposal to enhance the threshold of sub-prime lending rate (PLR) credit to farmers. The working group will shortly take a decision on enhancing the present 2 lakh limit.

The group is also considering a proposal to make it mandatory for farmers, who are willing to avail credit from banks, to insure crops in areas which are more prone to the vagaries of nature.

"Crop insurance is available everywhere but the coverage is not adequate," said B Samal while discussing various proposals being considered by the group.

The group is also reviewing the common practice of reserving a day as non-business day in a week. According to Samal, bankers in rural India utilise the day more often to complete pending work than to undertake field visits. "We might bring down the number of days available for such activities," Samal said.

Meanwhile, total institutional agricultural credit flow during the 8th five-year plan aggregated Rs 98,850 crore which was estimated at Rs 2,30,000 crore during the 9th plan period.

During 2001-02, commercial banks provided 52 per cent of the rural credit, 42 per cent was provided by cooperatives and the rest 8 per cent by regional rural banks. A 4 per cent growth in agriculture would mean a total credit flow of Rs 7,36,570 during the 10th plan period.

Nevertheless, constraints to rising credit flow to agriculture was mainly owing to high transaction and monitoring cost, lower margin available on lending below Rs 25,000. Absence of effective risk management measure and low recoveries have also been an impediment.