Rural credit should be tailored to raise farm income: ParPanel

A Parliamentary committee today suggested that rural credit dispensation, including crop insurance policies of the government, should be tailored in a manner that will lower the costs of farming, raise farm revenue and thereby increase income of farmers.
"The Committee would like to point out in this regard that the lending norms of RBI should also scrupulously take into account the regional disparities, peculiarities and social inequities prevailing across the country," Standing Committee on Finance headed by senior congress leader Veerappa Moily said in the report tabled in Parliament today.
'One-size fits all approach' may not yield the desired results in a geographically and socially diverse country like India, it said.

The uneven spread of rural credit is also amply reflected by varying CD ratios of banks across regions, particularly the Eastern and North-Eastern regions, it said.
"The Committee would therefore expect the 'priority sector lending' guidelines and norms to be more flexible and attuned to ground realities as also our social priorities. It is necessary that the special development needs of under - developed regions like the North-East are also duly factored in," it added.
It should also be ensured that representatives or experts from the agriculture sector are appointed on the boards of public sector banks as per guidelines of RBI, it said.

The panel also suggested that there is also a need to increase the risk-bearing capacity of farmers by promoting integrated farming (comprising livestock, animal husbandry, fishbreeding in land-locked areas, pisciculture etc) and associated crop insurance so that servicing debt becomes self-sustaining.

The Committee would thus recommend an integrated and comprehensive credit-crop-livestock health insurance package for all farmers, the report said.
Crop insurance coverage may also be enlarged and made universal by including all the crops in the entire country, insuring all major risks that may lead to crop failure, it added.
There is an urgent need to make crop insurance scheme popular among the farming community, while instilling confidence among them about the efficacy of the scheme, it said.

Appreciating that the existing dispensation in the form
of NABARD which has served the country reasonably well over the years, the report said it should play a more pro-active role in this direction in a more systematic and planned manner.
It is best placed for synergising credit operations at ground level, should be further strengthened and utilised more extensively and effectively for a much wider reach and coverage.
Noting that it is the Public Sector Banks (PSBs) who have been shouldering much of the allocated responsibility under 'priority sector credit' to agriculture, the report said that all the banks mandated by RBI in this regard to gear up their efforts to achieve the stipulated targets for agriculture credit, including the Private Sector Banks and other Financial Institutions.

The Committee would also recommend that the RBI should re-visit the priority sector norms with enhanced targets for agriculture, while restoring the distinction between direct and indirect credit to agriculture.