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1998-99 at an average of 9.2% per annum, whereas the loans issued during
the same period grew at an average rate of 16.2% per annum. It appears that
the banks sought to fill the gap created by loan waivers. Also, concerted efforts
were made in the 1990s to achieve better credit recovery and thus reduce
non-performing assets (NPAs). At the same time, in the 1990s special efforts
were made to expand agricultural credit base. First, the target of 18% of net
bank credit for lending to agriculture was introduced in the year 1989 and
the banks were required to achieve this target by March 1990 (though there
were shortfalls, there were pressures on the banks to issue larger amounts
of credit for agriculture). Second, since 1994-95, public sector banks were
asked to formulate Special Agricultural Credit Plans (SACP) with a view to
achieving a marked improvement in the flow of credit for agriculture. Banks
were thus advised to fix the self-set targets showing an increase of at least 20 to
25% over the disbursement in the previous year. Third, the RIDF contributions
by banks for shortfalls in agricultural credit targets were introduced in
1995-96; they were also treated as part of agricultural credit, though as indirect
and only up to 1.5% of NBC. Fourth, in the year 1998-99 the Kisan Credit Card
(KCC) scheme was introduced with a view to facilitating quicker flow of short-
term agricultural credit. All of these factors were responsible for the sizeable
increases in the disbursement of farm credit, particularly during 1993-94
(+19.8%), 1994-95 (+25.0%) and 1995-96 (+26.2%).
The bulge of agricultural credit after 1999-2000 almost continuously is
explained by a qualitative change in the nature of farm credit extended since
then. First, in April 2001 private sector banks were asked to achieve the target
of 18% of net bank credit for agriculture within a period of two years, that
is, by March 2003. Secondly, simultaneously, it was found that the public
sector banks were also not fulfilling the 18% target and hence the banks were
advised by Reserve Bank to step up lending to agriculture (and other priority
sectors) so as to attain the stipulated targets by March 2003. Thirdly, insofar
as agriculture was concerned, the scope of priority sector was expanded
during 2000-01 to include (i) bank finance to agriculture through NBFCs, and
(ii) finance for distribution of inputs for activities allied to agriculture up to
`
15 lakh (raised from
`
5 lakh). Also, since February 2000, micro-credit had
been reckoned as part of banks’ priority sector lending. Above all, as explained
earlier, a major step taken by the Government, effective from 2004-05, was the
introduction of a policy of doubling bank credit within a period of three years
(2004-05 to 2006-07) to begin with but continued thereafter.
As a result of thesemultiplicity of developments, the growth of bank credit
against agricultural and allied activities has galloped year-by-year, interestingly
