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both in terms of loans outstanding and loans disbursed (Appendices M and
N). However, unlike in the 1990s when the growth of loans issued outpaced the
growth in loans outstanding as a result of better recovery rates, agricultural
credit growth during the latest decade has been sizeable but both in terms of
loans issued and loans outstanding. Between 1998-99 and 2003-04, there was
an average growth of 21.2% per annum in loans issued and 21.8% in loans
outstanding. This was followed by yet another bout of farm credit expansion
after 2003-04, that is, after the initiation of the policy of doubling of bank
credit in 2004-05. Between 2003-04 and 2009-10, the average growth of bank
credit has been 24.1% per annum as per loans issued and 19.0% per annum as
per loans outstanding. It must be admitted that in the latest period, the lower
rate of growth in the outstandings of agricultural credit is not attributable to
any better loan recoveries. As explained elsewhere in this Report, the NPAs of
scheduled commercial banks have substantially increased in recent years; this
has been particularly so in respect of agricultural advances. What has helped
to reduce the rigour of loans outstanding has been the Agricultural Debt Relief
(ADWDR) Scheme, 2008, whereby a huge amount –
`
52,500 crore – has been
waived. Under the Agricultural Debt Waiver and Debt Relief (ADWDR) Scheme
2008, all agricultural loans disbursed up to March 31, 2007and overdue on
December 31, 2007, were covered under the waiver and relief scheme. For all
marginal farmers (holding up to 1 hectare) and small farmers (1-2 hectare),
there was a complete waiver of all loans overdue on December 31, 2007 and
which remained unpaid on February 29, 2008. For others, there was a one-
time settlement (OTS) by which a rebate of 25% was given for the payment of
the balance of 75%.
Second, short-term loans versus term loans:
Second, the share of short-term loans in total agricultural disbursements
has moved in a zigzag course in the 40-year period (Chart 11); it gradually fell
from 72% in the early 1970s and reached the lowest level of 57% in 1991-92.
Thereafter, the short-term loan share looked up and regained, by the early
years of the century, the 71% share obtained in the early 1970s; it again slipped
to 65% in 2006-07 but soon moved upward to touch the highest level of 73%
in 2009-10. Correspondingly, the share of term loans moved the contrary way
(Chart 11).
These zigzag behavior of short-term and term loans are explained by a
number of factors on the demand as well as supply sides. On the demand side,
the fluctuating nature of farm output specific to some periods did affect credit
offtake. In Chapter 2, we have done some periodisation of the agricultural
