4
their respective current inputs and farm sector private investment, there are
the most enviable results of (a) very close to the full part of farmers’ inputs
now being financed by short-term credit, and (b) about 90% of private farm
investment being similarly financed by term loans from banks. This appears
somewhat unrealistic and it is obvious that the conventional demand-side
factors have their limitations.
But, what still makes agricultural credit as an important aspect of public
policy are: large dependence of the population on agriculture; vast financial
exclusion of the farm community, particularly the small land-size groups;
growing size of purchased inputs; and vast inter-regional disparities requiring
to fill the gaps.
The next two chapters, Chapter 9 on Branch Banking: A Costly Neglect
and Chapter 10 on Lead Bank Scheme, have been singled out for separate
treatment because of our firm conviction that that the absence of a sound
institutional structure has been responsible for the severe incidence of
financial exclusion and the associated neglect of the farm sector, particularly
from distributional angles. Chapter 9 brings out how the government has been
dithering on filling the institutional vacuum with branch banking and how they
have taken a 360 degree turn from no need for fresh brick and mortar bank
branches to 300 branches to be opened on a day or 2700 branches in year
in UP; the policy prescription of 25% of new branches to be in rural areas.
The chapter brings home the importance of resurrecting the rural financial
architecture in a steady and systematic way with advance planning and with
appropriate infrastructure.
Chapter 10 quotes significant amount of studies to show that banks
have neglected the institution of the Lead Bank Scheme which was created with
considerable fanfare. Apart from an NIBM study, the Usha Thorat Committee
Report has raised the overall policy perspective on the institutional framework
of the Lead Bank Scheme to a higher plateau. Emphasizing its usefulness,
the Committee has designed the overarching objective of the Lead Bank
Scheme as enabling banks and state governments to work together to achieve
the national goals of financial inclusion and inclusive growth, which are two
sides of the same coin. A number of recommendations made by the Usha
Thorat Committee concerning the District Credit Plans, Potential Linked Plans
and District Development Plans, and the various institutional arrangements
around the institution of the Lead District Manager, have been highlighted in
the chapter.
