Subsidised farm lending fails to take off
The government’s plan to provide short-term credit at concessional 7% rate to farmers is not seeing any momentum as yet.
By TNN |
KOLKATA: The government’s plan to provide short-term credit at concessional 7% rate to farmers is not seeing any momentum as yet. Cooperative credit institutions (CCIs), which work closely at the ground level, have refused to lend at this concessional rate even as commercial banks are reported to have started offering soft loans to farmers.
Under this scheme, farmers are entitled to get soft loans with an upper limit of Rs 3 lakh.However, the refusal from CCIs means that for all practical purposes, 32 state cooperative banks with their 1,000 branches, 368 district credit cooperative banks (DCCBs) with a network of 13,000 branches and more than one lakh primary agricultural societies (PACS), are not offering short-term loans to farmers at 7% rate.
Their refusal is in protest to the government’s decision to offer interest subvention only to commercial banks and regional rural banks under this scheme. In other words, CCIs are not getting any subvention from the government.
“We have made it clear to the finance ministry that we will not lend at 7% rate until and unless the ministry offers us the interest subvention,” said B Subrahmanyam, managing director of National Federation of State Cooperative Banks.
The government has set a total lending target of Rs 39,000 crore to CCIs for ’06-07. This means these agencies would need a total interest subvention of Rs 1,750 crore this fiscal for lending the amount at 7% rate.
The government has, however, assured to provide interest subvention to the National Bank for Agricultural & Rural Development (Nabard), which, in turn, decided to offer cooperative agencies refinance at 2.5% annual rate as against 5.5-5.75% earlier. Nabard has also decided to increase its refinance support to Rs 14,000 crore to CCIs for ’06-07, from Rs 8,000 crore earlier.
“This leaves Nabard conceding a margin of 4.5% on their share of Rs 14,000 crore, amounting to Rs 630 crore. Therefore, agricultural cooperative agencies would need Rs 1,120 crore (Rs 1,750 crore - Rs 630 crore),” said Mr Subrahmanyam, demanding the government should release Rs 1,120 crore to CCIs as subvention.
Under this scheme, farmers are entitled to get soft loans with an upper limit of Rs 3 lakh.However, the refusal from CCIs means that for all practical purposes, 32 state cooperative banks with their 1,000 branches, 368 district credit cooperative banks (DCCBs) with a network of 13,000 branches and more than one lakh primary agricultural societies (PACS), are not offering short-term loans to farmers at 7% rate.
Their refusal is in protest to the government’s decision to offer interest subvention only to commercial banks and regional rural banks under this scheme. In other words, CCIs are not getting any subvention from the government.
“We have made it clear to the finance ministry that we will not lend at 7% rate until and unless the ministry offers us the interest subvention,” said B Subrahmanyam, managing director of National Federation of State Cooperative Banks.
The government has set a total lending target of Rs 39,000 crore to CCIs for ’06-07. This means these agencies would need a total interest subvention of Rs 1,750 crore this fiscal for lending the amount at 7% rate.
The government has, however, assured to provide interest subvention to the National Bank for Agricultural & Rural Development (Nabard), which, in turn, decided to offer cooperative agencies refinance at 2.5% annual rate as against 5.5-5.75% earlier. Nabard has also decided to increase its refinance support to Rs 14,000 crore to CCIs for ’06-07, from Rs 8,000 crore earlier.
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“This leaves Nabard conceding a margin of 4.5% on their share of Rs 14,000 crore, amounting to Rs 630 crore. Therefore, agricultural cooperative agencies would need Rs 1,120 crore (Rs 1,750 crore - Rs 630 crore),” said Mr Subrahmanyam, demanding the government should release Rs 1,120 crore to CCIs as subvention.
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