Sonia asks banks to provide credit to farmers at low rates

New Delhi, Feb 10 (PTI) Seeking to insulate small andmarginal farmers from exploitation by moneylenders, UPAChairperson Sonia Gandhi today asked the banks to providecredit to farming community at lower rates of interest.

Gandhi was speaking at the launch of Financial Inclusioncampaign -- Swabhimaan -- of the government, that seeks toprovide banking services to 73,000 villages with population ofover 2,000 and open at least 5 crore new account by March 2012under the campaign.

"One of the most important objectives of the campaignwill be to enable small and marginal farmers to obtain creditat lower rates from banks and other financial institutions sothat they could be insulated from exploitation bymoneylenders," Gandhi said.

Speaking at the function, Finance Minister PranabMukherjee said banking services would be rolled out in 20,000villages this fiscal, but warned the banks against selectingwrong entities as their business correspondents -- personsacting as intermediaries between rural people and banks.

"For the year 2010-11, we have set a target of roll outin 20,000 villages. I am confident that this target will beachieved," he said.

Business Correspondents (BCs) are the face of the banksand they should be conscious of reputational risks that couldarise if the wrong kind of BCs, or those who are providingtechnology as backup, are selected.

With agriculture poised to grow at 5.4 per cent in thecurrent fiscal compared to just 0.4 per cent a year ago,Mukherjee said this was possible partly due to phenomenalgrowth in bank credit to the sector.

"This is a big improvement and is partly due to thetremendous growth in bank credit to the agriculture sectorwhich is expected to cross the target of Rs 3,75,000 crore setfor the year," he added.

He, however, expressed concern that only about 38 percent of bank branches are in rural areas, providing coverageto 40 per cent of the country''s population. Besides, 51.4 percent of farmer households in the country are financiallyexcluded from both formal and informal sources of credit.

Gandhi appealed to the bankers to take up this taskwith a sense of responsibility and understanding and exercisecourtesy and respect, specially to small borrowers.