Decline in the number of farmers taking loan

In spite of increasing loan payment in the last three financial years, the number of farmers who have been financed by banks has declined considerably.

During the last three years - 2004-05, 2005-06 and 2006-07 the number of farmers financed was 41.3 million, 38.5 million and 39.7 million respectively.

Though, the loan payments to farmers have increased by 44 per cent to Rs 1,25,309 crore in 2004-05, by 44 per cent to Rs 1,80,486 crore in 2005-06 and by 13 per cent to Rs 2,03,297 crore in 2006-07. In April-October of 2007-08 loan disbursements stopped at Rs 1,20,062 crore.

On seeing such figures the National Bank for Agriculture and Rural Development (NABARD) have decided to conduct a study at the ground level to examine this mismatch with the help of expert bodies such as Gokhale Institute of Politics and Economics, Xavier’s Institute of Development Action and Studies and Indian Institute of Bank Management. Official sources said once the study is completed, the reasons for the mismatch between the number of accounts financed and credit disbursed will be clear.

The number of farmers financed declined sharply in the case of cooperative banks. Due to inherent weakness of the cooperative credit structure loans financed by cooperative banks have declined from 22.5 million in 2004-05 to 19.3 million in 2005-06 and further to 18.9 million in 2006-07

According to officials the main reasons for the reduction in the number of accounts is accredited to the multi-purpose Kisan Credit Card (KCC).

KCC is a combined loan facility, which includes components for production, consumption and investment purposes. As one KCC account effectively covers three accounts, this has also led to a decrease in the number of accounts financed.

Likewise, loans issued during the kharif and rabi seasons were treated as two separate loan accounts previously. Official stated with the introduction of KCC, the same are now treated as a single account.

Officials added more stress on providing finance to the rural poor under a group mechanism such as a self help group, presently a ‘Group Account’, effectively covers a number of farmers, thereby affecting the growth in the number of accounts financed.