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been restructured as the National Rural Livelihoods Mission (NRLM) and
rechristened, borrowing from the Bihar experiment, as
Aajeevika.
They need
programmes for skill formation and, apart from support from self-help groups
(SHGs) formed under NRLM, the objective of RSETIs planned to be set up by
Lead Banks in each district can be expanded to become a crucial institution for
helping skill formation and vocationalization of even marginal farmers.The in
turn will be linked with better financial inclusion.
B. Details of Institutional Finance for Agriculture
Enumerating the series of polices that have shaped the flow of
agricultural credit over the past six decades, which has been classified into 14
steps taking the clue from Governor Subbarao’s recent speech at a NABARD
function, the study has sought to present, as comprehensively as it can, a
report card on the performance of the banking system in accomplishing farm
credit delivery in different phases. The report card has been divided into two
parts: (i) performance of scheduled commercial banks (SCBs) in farm credit
delivery, which are by far the dominant segment of the banking system; and (ii)
total flow of ground-level institutional credit including that from cooperatives.
The performance of SCBs in farm credit delivery has taken the study
through a series of issues – four phases of (i) high expansion after bank
nationalisation (ii) a sharp slowdown in the 1990s (iii) forced expansion after
signs of social revulsion; and (iv) some pause in the latest period as a reaction
to the large forced increases; doubling of farm credit and its quality; credit
expansion and land size; emerging importance of indirect credit; trends in non-
performing assets (NPAs); persistent state-wise and inter-regional disparities;
debt waiver scheme and interest rate subvention; an analysis of short-term
credit in relation to agricultural inputs and term credit in relation to private
investment in agriculture; and measurements of credit intensity and trends in
income elasticity of agricultural credit. All these have been empirically analysed
with all available data over years across states and regions.
Undoubtedly, taking the long period of 1971-72 to 2009-10, the credit
intensity ratio (farm credit to agricultural GDP ratio) has shown a significant
improvement from around 10% in the early 1970s to over 40% in the latest
period, suggesting that the banking system has played a remarkable role in
delivering direct bank credit in proportion to the growth in agricultural GDP.
Going a step further, the output elasticity of farm credit worked out appears
significant and positive; roughly every 1% increase in agricultural credit
produces 0.29% increase in agricultural GDP. Truly, there have been differing
phases in this performance, and after the 1990s of banking reforms, indirect
credit has assumed some added importance.
