The Hindu Business Line : Banks told to invest in wasteland development

THE Reserve Bank of India has asked banks to work with the State Governments and invest in the development of wasteland and fallow land for irrigation, as per the recommendations made by the advisory committee on flow of credit to agriculture and related activities from the banking system.

In a circular to commercial banks, the apex bank has said, investments in such resource development may be treated as an integral part of agriculture lending.

The advisory committee chaired by Prof Vyas, had observed that India has about 24.5 million hectares of wasteland and 16.6 million hectares of fallow land. Sizeable parts of these could be converted into cultivable land through appropriate crop selection, improved water-use efficiency, and adoption of watershed approach and development of irrigation potential.

In keeping with the advisory committees recommendations, the central bank has suggested that banks must absorb more agricultural graduates for staffing rural branches of commercial banks. "It needs to be emphasised here that all over the world, retail banking is emerging as a more profitable and less risky proposition. In the Indian context, there is hardly any better avenue for retail lending than agriculture", the RBI has said.

Individual volunteers, farmers' clubs or NGOs and SHGs can be used as direct selling agents in villages. Banks may also explore possibilities of outsourcing loan appraisal and monitoring at branches, using such facilitators as business partners, the apex bank has said.

Low-cost ATMs running on diesel generator sets could be used in rural areas for cash dispensation. Wherever volume of business justifies it, computers in rural bank branches may be networked for a free flow of intra-branch and inter-bank information.

This could avoid physical movement of staff between various offices allowing them more time for servicing the clientele instead.

Some prerequisites, such as reliable power supply and connectivity, availability of bandwidth, proper facility management and maintenance in rural areas, however, need to be met. Banks must formulate a time-bound programme for using IT in rural branches.

Banks may also increasingly consider associating with contract farming, subject to availability of proper legal and regulatory framework in different States, according to the RBI.

More Stories on : RBI & Other Central Banks | Farm credit

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