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agriculture may not be much higher than for lending to the non-priority
sector private sector credit exposure as a whole” (Lecture delivered by
Rakesh Mohan at the 17
th
National Conference of Agricultural Marketing,
Indian Society of Agricultural Marketing, Hyderabad, February 5, 2004).
We have made an independent assessment of the NPA positions of public
sector banks. As shown in Table 4.39, the percentage share of agriculture in
the total NPAs of public sector banks has been ranging from 14% to 15% for
the years March ending 2001 to March ending 2006, which has been just
equivalent to the sector’s share in net bank credit. As Rakesh Mohan (2004)
spelt out above, the NPAs situation has been more discouraging in respect of
small-scale industries (SSIs) and other priority sectors. Interestingly, there has
occurred a very sharp rise in NPAs of “other priority sectors”, that is, those
miscellaneous categories for which banks have found it very attractive to lend
in preference to lending for agricultural and SSIs (Table 4.32).
A more direct evidence of the satisfactory performance of the agricultural
sector
vis-à-vis
other priority sector categories is to be seen in Table 4.33. As
seen therein, there has occurred a sharp decline in the proportion of NPAs in
total agricultural advances, from 13.7% in 2001 to 1.9% in 2009.
However, in the latest three years 2010 to 2012, the situation relating to
NPAs has deteriorated, with the NPAs in agriculture as percentage of advances
touching 4.7% in March 2012. Interestingly, all categories of commercial banks
have experienced such deterioration – from SBI group from 2.2% to 6.1%,
nationalised banks from 1% to 4.1% and private sector banks from 1.9% to
2.4% during the period. This may have something to do with the policy of
doubling bank credit for agriculture – a forced phase of credit expansion after
2004-05. It is not our contention that agricultural lendings are risk-free; it
is just that agricultural lendings are in no way more risky than the lendings
to other sectors. More importantly, NPAs are a function of the organisational
efforts put in to lend and to recover loans. Also, considering the fact that
farmers face a variety of risks and uncertainties, the lending institutions have
to show greater sensitivities to their problems and needs.
J. Weighted Average of Interest Rates on Agricultural Loans
It should be admitted that these data do not cover small borrowal
accounts of below
`
2 lakh which may fetch lower rate of interest. Even so,
the limited point sought to be made here is that on an average banks do earn
reasonable rates of interest from agriculture – certainly much higher than the
prime lending rates (PL
`
) which recover all costs and provisions; small loans
