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expected to discourage distress sale of crops by these farmers and encourage
them to store their produce in warehouses (p.31).
To an extent these interest rate subventions, to the extent they could be
captured in the above data in respect of above
`
2 lakh of loans, are noticed in
these data. The reductions in the weighted average of loan rates from about
11.77% at the end of March 2008 to 10.99% and 9.99% in the next two years
may be reflective of this phenomenon.
As part of the interest subvention scheme, interest subvention has
been given to NABARD by the Government of India for providing concessional
finance to scheduled commercial banks and RRBs at 4.0% and 4.5% interest
rate, respectively. The amounts involved in the interest subvention scheme as
given by NABARD are as follows:
As part of the interest subvention scheme, interest subvention has
been given to NABARD by the Government of India for providing concessional
finance to scheduled commercial banks and RRBs at 4.0% and 4.5% interest
rate, respectively. The amounts involved in the interest subvention scheme as
given by NABARD are as follows: Because of the complex nature of the interest
subvention scheme, it has been difficult to derive the possible sizes of farm
loans involved in these subvention schemes.
K. Credit-Deposit Ratio as a Potent Instrument of Achieving
Distributional Goals in Credit Delivery in Rural Areas
The Rationale
With a view to reducing inter-regional imbalances in credit delivery
and encouraging banks to deploy the bulk of rural and semi-urban deposit
funds in those areas themselves, the public sector banks had been asked to
achieve a credit-deposit ratio of 60% in their rural and semi-urban branches
since March 1979. This target was subsequently extended to private sector
banks also. There was no state-level target but the 60% norm had emerged as
a yardstick to judge banks’ performance in backward states and districts. In
other words, this is a target which every bank, and not necessarily every rural
or semi-urban branch, was required to achieve.
The 60% C-D ratio generally allowed for the banks’ non-credit
requirements of cash reserve ratio (CRR) and statutory liquidity ratios (SLR)
including cash with themselves. The imposition of such a target ratio had its
rationale in the historical neglect by the banking industry of rural and semi-
urban areas, of backward regions and states and of agriculture and other
informal sectors – all of which were found to be closely linked. It was even
