Land fragmentation major hurdle in rural credit absorption: S S Mundra

The RBI deputy governor said rural credit distribution imbalance is another problem that affects rural development

Land fragmentation is a major hurdle in rural credit absorption which adversely affects agriculture and rural development, said S S Mundra, Deputy Governor, Reserve Bank of India.

“Average land holding in India is 1.15 hectare per farmer, which was 2.1 hectare per farmer at the time of independence,” said S S Mundra.

When rural credit absorption gets affected farmers stay away from modern farming, use of advanced equipment etc, added Mudra.

Rural credit distribution imbalance is another problem which affects the rural development, said Mudra.
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“In India, farmers who own more than 10 hectare land use 85% institutional credit. Landless farmers use only 15% of the institutional credit. So, despite strong rural credit figures there is lot of imbalance,” he said.

On important steps taken in the direction of rural and agriculture credit, Mundra said: “For the first time, in the priority sector guideline revision, small and marginal farmer have a separate 7% allocation for rural credit. This along with effective insurance scheme launched by the government will address the rural credit distribution imbalance.”