NABARD ups credit potential for state 31% in 2011-12

The National Bank for Agriculture and Rural Development (NABARD) has set the credit flow potential for Karnataka at Rs 41,085.23 crore in 2011-12, up 31 per cent over last financial year on the back of higher credit demand from agriculture and allied sectors.

While the crop loan formed around 45 per cent of the overall estimates, priority sectors like industry and services have a share of 29 per cent in this figure. Remaining credit demand will come from non-farm sector that is pegged at 8 per cent along with 18.4 per cent coming from agri-term loan segment.

“While the demand for agricultural credit has witnessed an increasing trend in the last three years, it is yet to translate into production and productivity figures. So, we need to look into the end use of agricultural loans in the state,” Prakash Bakshi, executive director of NABARD said in the state credit seminar, 2011-12 here on Tuesday. He also said that the banks should be more proactive in rural areas of the state on the back of higher credit,deposit ratio.

“In some parts of the states, the credit, deposit ratio stands at as high as 115 per cent, indicating the fact that there is leverage for the banks to lend more in those areas,” he added.

In the report prepared by the bank, it emphasises farm mechanisation, sound utilisation of water resources, land development and higher focus on horticulture to drive growth in the agricultural sector.

Referring to the financial inclusion, the report indicated that the process of ensuring access to financial services and timely and adequate credit were very important for attaining financial inclusion in the state.

All districts in Karnataka are declared 100 per cent financially included under phase -I of financial inclusion programme. By the end of March, 2010, 46.64 lakh ‘No-frills’ accounts were opened out of which 16.67 lakh accounts were operationalised, the report said.

“We need to educate people in rural areas on the significance of financial literacy to attain the goal of financial inclusion,” Bakshi said.

Talking about the problems faced by farmers in getting a farm loan, he said that while all banks were giving farm loans at seven per cent, interest cost of farmers to get that loan was same to the loan amount in some areas.

NABARD is pushing hard to promote self help groups with credit linkage, he added.

The bank has also urged banks to go for ‘joint liability group’ approach in order to promote group lending to self help groups. “Joint liability group approach will help in reducing the transaction cost for the SHGs with greater chances of repayment,” he said.

Many state government officials also echoed the similar sentiment top drive growth in agriculture sector

“Karnataka, which is going to host an agri-business summit in June, 2011, is hopeful of getting a sound response for promoting profitable agriculture in the state,” S V Ranganath, chief secretary of Karnataka, said.