The Hindu Business Line : Assocham chalks out roadmap for rural credit

THE Associated Chambers of Commerce and Industry of India (Assocham) has drawn up a roadmap for a higher rural credit flow for the agriculture sector, and warned the Government that if it failed to arrest the declining trend in rural credit, its vision to sustaining over 9 per cent growth rate in the sector was unlikely to be realised in the future.

The roadmap is based on the chamber's latest study on `Declining rural credit and its adverse impact on future agriculture growth' released by the Assocham President, Mr Mahendra K. Sanghi, here today.

The study says that the major reason for agriculture sector recording a negative growth of 5.2 per cent in 2002-03 was the sharp fall in rural credit. Bank credit went down to 11.8 per cent in 2002 from 15.7 per cent in 1992.

According to the chamber, the regular fall in rural credit, apart from a few exceptions, in the last decade led to an adverse development in this sector, and also increased the apathy of institutionalised finance for the farming community all over the country.

The inadequate release by various Government machineries, including the banking and cooperative sector, to the agriculture sector from 1992 also led to poor and almost negligible penetration of reforms in this segment.

The study indicates that while the agriculture sector continues to remain untouched by the reform process even now, the introduction of reforms in sectors such as industry, partly banking and finance did have a significant impact on the growth of this sector.

The study highlights an interesting revelation. It points out that while the banking sector garnered deposits exceeding Rs 1,00,000 crore from the farming community in the last decade, the credit extended to them did not even touch Rs 50,000 crore.

Further, while in 1992, the number of farmers who benefited from institutionalised financing under various State Governments stood at a little over 270 lakh, it declined to less than 200 lakh in 2002.

Assocham's findings reveal that out of 27 State-owned banks and as many banks in the private sector, only five public sector banking institutions and two from the private sector met the required 18 per cent agricultural credit extension target to the farming community between 1992 and 2002.

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