Farm credit growth declines in Dec quarter

Need to focus on investment credit for farm activities, notes SLBC

The year-on-year growth of farm credit in Gujarat during December 2011-12 quarter has declined by half against what was seen in September quarter, revealed a State Level Bankers' Committee (SLBC) - Gujarat report.

According to the report, farm credit in Gujarat, on year-on-year basis, plummeted to 8.68 per cent for December quarter from 16.18 per cent recorded during September quarter of current fiscal. During December 2011-12 quarter, advances to agriculture was Rs 31,612 crore, up by 8.68 per cent from Rs 29,086 crore in the same period previous year. However, in its report for the September quarter 2011-12, SLBC-Gujarat had reported that advances to agriculture stood at Rs 30,902 crore for September 2011-12 quarter from Rs 26,599 crore in the same period in 2010-11, showing the year-on-year credit growth of 16.18 per cent.

 

The comparison of the two quarters showed that year-on-year credit growth for agriculture sector almost halved in December quarter of 2011-12, over what was seen in September quarter.

The SLBC report also noted that agriculture advances could not meet the targets set by an RBI-appointed Committee.

"The performance against benchmark under Agriculture Advances fell short by 1.17 per cent and remained at 16.83 per cent as against the benchmark of 18 per cent," the report stated.

The loan disbursements too remained lower. As against the target of Rs 25,391 crores for disbursement under Agriculture Sector for the year 2011-12, banks have disbursed Rs 15,176.15 crores or 59.70 per cent of the target, as against Rs 14187 crores or 66.90 per cent during the corresponding period of the previous year.

According to the report, majority of the loan or 78 per cent is under Short Term Crop Loan sector and the remaining 22 per cent under Term Loan Sector. In the first quarter, majority of credit outflow goes towards for production credit and it is expected that in the remaining period the investment credit will pick up.

"In order to build up the farm assets and to have consistency in the Agriculture finance at the year end, Banks need to concentrate on investment credit for the various farm activities," the SLBC noted in its report. "Credit off-take in the agriculture has dropped mainly because of the concerns about a possible rise in the non-performing assets (NPAs). There were weather related issues which raised concerns about crop damage. Also, banks were apprehensive about timely repayment of farm loans," said an industry source.

It may be noted here, that farm credit was 16.83 per cent to the total advances of Rs 2,10,961 crore.

The total advances during December quarter grew by 21 per cent on a year-on-year basis, which is lower compared to 23 per cent growth reported during September quarter.

"There were weather-related uncertainties during this period. Even in the uncertain weather conditions, the demand for credit will not go down as the farmer has to incur expenses on fertilisers, seeds etc even if it rains late. But there can be concerns about repayments of advances as the delay in season would disturb everything," said Maganbhai Patel, pradesh secretary - Gujarat, Bhartiya Kisan Sangh (BKS).