Restructure in Rural branches of Commercial banks: Expert

Bangalalore, Apr 09(UNI) The Chairman, Advisory Council to the Prime Minister Dr C Rangarajan has strongly called for the restructure of the rural branches of the commercial banks in the country to achieve the twin objective of improving the inflow of rural credit and also enhance productivity in agriculture.

Speaking after inagurating a National Seminar on 'Macroeconomic policy, agricultural development and Rural Institutions', organised by the Institue for Social and Economic Change in honour of Prof A Vaidyanathan a renowned economist, here today, Dr Rangrajan said that the commercial banks, the major sources for agriculture credit in the country must go beyond providing credit and extend a helping hand in terms of advice on a wide variety of matters relating to agriculture.

He said that as in micrro-finance, rural credit was all about credit plus services by the banks and the agricultural officers must provide services that will help in making agriculture an integrated activity with appropriate backward and forward linkages through providing farm advisory services. He said that for the last 15 years there was a rapid expansion about the flow of credit into agriculture and it was raised from rupees 5402 crore during 1991-92 to 14,467 crore in 1996-97 to an whopping 60,022 crore in 2003-04 with an compound annual growth rate of 22.2 per cent by both commercial banks and RRBs put together. Between 1991-92 and 1996-97 credit flow increased by 2.67 times and between 1996-97 and 2001-2002 by 2.65 times, despite this increase the target set to achieve 18 per cent of net bank credit into agriculture was not yet fulfilled, he regretted.

He said that the targets for credit flow were introduced at a time when the preemption of deposits in the form of reserve requirements was very large. The number of accoutns in direct advances to agriculture by commercial banks at the end of March 2004 showed a decline of more than six lakh accounts as compared to the number of such accounts by the end of March 1995.

He said that the formulation of any strategy for providing credit acess to small and marginal farmers must recognize the fact that the market for rural credit was not a single market. The rural credit market is a differentiated or segmented one with the small and marginal farmers with different needs and priorities at one end of the spectrum and the large farms with a commercial orientation at the other end. Provision of credit for commercial agriculture was not different from poviding credit to the industry and the provision of credit to farmers with a surplus was also of a similar nature. Commercial banks in particular should have no hesitation in providing credit to those segments where normal calculations of risk and returns apply.

Favouring to have special attention towards small and marginal farmers and persons with low income while providing credit, he said that the banks should also take into consideration about the facts that that these groups generally do not have the necessary capabilities to deal with organized credit institutions including providing collateral securities to offer. The strageties for meeting the credit requirements of the small and marginal farmers will have to be thought in terms of policies, credit develiery mechanism and credit products, which meet the requirements of this segment of the rural credit market. While evolving such strategies, the composite needs of these groups of farmers such as credit, technology, input supplies, market information and consumption, need to be taken into account, he said.

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