Only 50% of farmers under agricultural credit net

NEW DELHI: At a time when the government is pushing for credit coverage for the entire farming community, only 50% of total farmer households in India are under agricultural credit net which includes both formal and informal sources of credit.

A large segment of small and marginal farmers are excluded from the institutional financial system. The flow of credit is skewed across states and regions.

Even within the states, there are sharp differences in credit flow to developed regions, regions with greater access to physical infrastructure and regions closer to urban centres as compared to underdeveloped regions.

“Due to a lack of banking penetration in remote areas, farmers specially small and marginal, are largely dependent on moneylenders for credit against collaterals. The government’s agricultural credit schemes are far from their reach making them vulnerable to higher cost of credit,” said a senior agriculture department official.

According to a National Sample Survey Organisation report on indebtedness of farmer households, of the 89.35 million farmer households, 43.42 million households are under debt. The report says that the most important source of loan in terms of percentage of outstanding loan amount is banks (36%) followed by moneylenders (26%) and co-operative societies (20%).

According to the report , Andhra Pradesh leads the tally having 82% indebted farmer households followed by Tamil Nadu (74.5%), Punjab (65.4%), Kerala (64.4%) and Karnataka (61.6%). “Of the estimated 60.3 lakh farmer households in Andhra Pradesh 49.4 lakh households are indebted while in Tamil Nadu out of 38.8 lakh households, 28.9 lakh are under debt.

LOWEST INDEBTEDNESS

However,hilly states such as Meghalaya (4.1%), Arunachal Pradesh (5.2%) and Uttaranchal (7.2%) are among the states having lowest number of indebted farmer households . “We are looking at increasing institutional credit flow for reducing dependence of farmers on non-institutional sources of credit. The credit flow has increased from Rs 86,981 crore in 2003-04 to more than Rs 4.75 lakh crore in 2011-12 ,” another agriculture department official said.

According to a recent report on the State of Agriculture, as percentage of agricultural GDP, institutional credit to agriculture has increased from 2.56% in 1970-71 to 7.11% in 1980-81 to 11.47% in 2000-01 , and 32.21% in 2010-11 . “Even then small farmers continue to resort to informal lenders as the current system of institutional credit to farmer suffer from nonfarmer friendly practices, delays in credit delivery and collateral problems,” the official said.