A Study On Agriculture Loan: Indian Context
A Study to find out problems faced by the farmers while
availing agriculture loan.
CHAPTER - I
(Introduction)
Agriculture and Indian economy:
Agriculture plays a vital role in the Indian economy.
Over 70 per cent of the rural households depend on agriculture as their
principal means of livelihood. Agriculture, along with fisheries and forestry,
accounts for one-third of the nation’s GDP and is its single largest
contributor.
The total Share of Agriculture & Allied Sectors (Including
agriculture, livestock, forestry and fishery sub sectors) in terms of
percentage of GDP is 13.9 percent during 2013-14 at 2004-05 prices. [As per the
estimates released by Central Statistics Office]. At 2011-12 prices composition
of Agriculture & allied, Industry, and Services sector is 16.20%, 31.22%,
and 52.58%, respectively.
As per the 4th Advance Estimates of Production
of food grains for 2013-14, total food grain production is estimated to be
264.77 million tonnes (MT).
With an annual output of 130 MT, India is the largest
producer of the milk in the world. It also has the largest milk-producing
animal population of over 118 million. However, milk yields per animal are
among the lowest in the world.
India is the biggest producer of pulses in the world at
19 MT and their biggest importer 3.5 MT.
India is the second largest producer of sugar in the
world and the government has aimed to increase the exports from 1.3 MT in 2013
to an average of 2 MT in 2014 and 2015.
Spice exports from India are expected to reach US$ 3
billion by 2016-17, on the back of creative marketing strategies, innovative
packaging, strength in quality and a strong distribution network. The Indian
spices market is pegged at Rs 40,000 crore (US$ 6.42 billion) annually, of
which the branded segment accounts for 15 per cent.
In 2013-14 India achieved a record food grain production
of 264 MT, beating the previous year’s (2012-13) 257 MT, according to data
provided by Department of Economics and Statistics (DES). Also, agricultural
profitability has increased over the last decade with record increases in MSPs
(minimum support prices) for agricultural produce for all covered crops.
The procurement target for rice during Kharif Marketing
Season (KMS) 2014-15 has been finalized as 30.05 MT.
Agriculture as priority sector:
The old saying “Agriculture is the backbone of Indian
economy” is still true in present time. Earlier agriculture sector was the
major contributor to the GDP. As per the food security concept this sector
holds its importance. Again more than 50% of households still depend on
agriculture as their prime income. These households constitute a large consumer
base. Without increasing their purchasing power the growth and sustainability
of other sectors is not possible.
As per the Reserve Bank of India priority sector refers
to those sectors of the economy which may not get timely and adequate credit in
the absence of this special dispensation.
The specter of farmer suicides due to crop failure seems
to have prompted the Reserve Bank of India to revise priority sector lending
guidelines for banks, doing away with the distinction between direct and
indirect agriculture lending and ensuring loan disbursal to the farm sector is
evenly spread out throughout the year.
In its revised guidelines for priority sector lending for
banks, the central bank said the present distinction between direct and
indirect agriculture is dispensed with.
Henceforth, lending to the agriculture sector will
include farm credit (which will include short-term crop loans and
medium/long-term credit to farmers), agriculture infrastructure and ancillary
activities. Bank loans to food and agro processing units will form part of
agriculture.
As per RBI guidelines 40% of total bank credit is
assigned to priority sectors. A sub target of 18% is mandated for agriculture
sector. All the commercial banks in India including foreign banks having more
than 20 branches have to comply with this.
Government initiatives:
Recognizing the importance of Agriculture Sector, the Government
during the budget 2014-15 took a number of steps for sustainable development of
Agriculture. These steps include enhanced institutional credit to farmers;
promotion of scientific warehousing infrastructure including cold storages and
cold chains in the country for increasing shelf life of agricultural produce;
Improved access to irrigation through Pradhan Mantri Krishi Sichayee Yojana;
provision of Price Stabilization Fund to mitigate price instability in
agricultural produce; Mission mode scheme for Soil Health Card; Setting up of
Agri-tech Infrastructure fund for making farming competitive and profitable;
provide institutional finance to joint farming groups of “Bhoomi Heen Kisan”
through NABARD; development of indigenous cattle breeds and promoting inland
fisheries and other non-farm activities to supplement the income of farmers.
Central Government recognizes and discharges its
responsibility to assist State Governments in overall development of
Agriculture sector. Effective policy measures are in position to improve
agricultural production and productivity and address problems of farmers. State
Governments are also impressed upon to allocate adequate funds for development
of agriculture sector in State plan, as well as initiate other measures
required for achieving targeted agricultural growth rate and address problem of
farmers.
The Department of Agriculture & Cooperation under
Ministry of Agriculture has entered into MOUs/Agreements with 52 countries
including United State of America. In addition, Department of Agriculture
Research & Education (DARE) and Department of Animal Husbandry, Dairying
& Fisheries (DAHD&F) under Ministry of Agriculture have also entered
into MOUs/Agreements with other countries taking the total number of countries
to 63. Agreements with these countries provide better agricultural facilities
due to cooperation in areas such as Research and Development, Capacity
Building, Germ-Plasm Exchange, Post Harvest Management, Value Addition/ Food
Processing, Plant Protection, Animal Husbandry, Dairy & Fisheries and also
help in enhancing bilateral trade.
The
Government of India realizes the importance of agriculture to the development
of this nation and hence has adopted several initiatives and programmes for
this sector’s continuous growth. Notable among them are Rashtriya Krishi Vikas
Yojana (RKVY); National Food Security Mission (NFSM); National Horticulture
Mission (NHM); Gramin Bhandaran Yojana; Integrated Scheme of Oilseeds, Pulses,
Oil palm, and Maize (ISOPOM), etc.
Some of the recent major government initiatives in the
sector are as follows:
·
The National Dairy
Development Board (NDDB) has announced 42 dairy projects with a financial
outlay of Rs 221 crore (US$ 35.47 million) in order to boost milk output in the
country and increase per animal production of milk.
·
The Government of
India has planned to invest Rs 50,000 crore (US$ 8.02 billion) to revive four
fertilizer plants and set up two new plants to produce farm nutrients.
·
The Ministry of Food
Processing Industries has taken some new initiatives to develop the food
processing sector which will also help to enhance the incomes of farmers and
export of agro and processed foods among others.
·
Israel has increased
its cooperation with Indian agriculture, helping farmers multiply their income
with better practices, yields and choosing the right crops or vegetables in a
success story that is boosting bilateral ties that have strengthened under the
Government of Mr. Narendra Modi, Prime Minister of India.
·
The Government of
Telangana has allocated Rs 4,250 crore (US$ 682.31 million) for the first phase
of farm loan waiver scheme. The scheme is expected to benefit 3.6 million
farmers who had taken loans of Rs 100,000 (US$ 1,605.46) or below before March
31, 2014.
Agriculture financing in India:
The Government
of India has initiated several policy measures to improve theaccessibility of
farmers to the institutional sources of credit. The emphasis of these policies
has been on progressive institutionalization for providing timely and adequate credit
support to all farmers with particular focus on small and marginal farmers and weaker
sections of society to enable them to adopt modern technology and improved agricultural
practices for increasing agricultural production and productivity. The Policy lays
emphasis on augmenting credit flow at the ground level through credit planning,
adoption of region-specific strategies and rationalization of lending Policies
and Procedures.
The district
level bankers committee or the district level technical committee on
agriculture presided by district collector decides scale of finance and area of
service for the bank loan on agriculture. They make region-wise policy along
with other government scheme. But most of the time the government schemes don’t
get aligned with bank loan policy.
Problems in agriculture financing:
Both the
government and Reserve Bank give special attention to agriculture financing in
India. They have formulated various policies for easy flow of credit to the
sector. Still the desired result is not achieved. There are other factors
affecting to achieve the goal. Due to high level of NPAs most of the banks are
hesitant to give loan to farmers.
First of all
farming is not an investment for most of the farmers. Farmers do cultivation
for their own consumption. When the banks provide them loan they are unable to
repay. So they default at first instance. At a later time when they and their
family members approach the banks for loan they are coming under the radar of
CIBIL. This may be one reason but holds true. In this report I have found other
problems in agriculture financing in India.
CHAPTER –II
Research
methodology
Objective of study:
The topic of the
study is to find out problems faced by the farmers while availing agriculture
loans. Before we know about the main problems, it is important to know the
socio-economic conditions of farmers. From this we can infer the real problems.
Statistics is not always a better idea. Statistics can be misunderstood.
Data collection procedure:
A structured
questionnaire was prepared to collect necessary data for the study. Most of the
time, the farmers were informed about the questionnaire details in odia
language so that they could understand it in a better way. Some additional
questions are also asked to find out any extra information. The data collected
is in random sampling method. Questions are asked to farmers taking loan before
as well as to farmers who are not availed such facilities. By this way we can
find out the reasons why most of the farmers are not availing agriculture
loans. The sample size is not predetermined. I discussed with more than 100
farmers within the specified time frame. I also met the Sarapanch of the
Panchayat and got some important information on various issues.
The survey is
less questionnaire oriented, it is more of a face to face interaction with the
village farmers’ community. It was more important to know the socio-economic
conditions of rural folks. It was more about their lives and culture.
Area of survey:
The focus area
of study is Taharpur GramPanhayat (G.P.) which consists of ten small villages.
Taharpur G.P. is coming under the area of service of State Bank of India,
Jajpur Road Branch. The villages under survey are Taharpur, Adhagan, Baladia,
Jaintala, Kanakadagadia, Kuanrada, Mulisarguda, Panasua, Santrapur,
Tentulikhunta and Khanduala. Area of service is generally assigned to a bank to
carry out various government programs which is decided by the district level
bankers committee chaired by the district collector.
Apart from
Taharpur Panchayat I also visited other nearby State Bank of India branches
like Panikoili, Vyasanagar, Duburi and I interacted with the branch managers
and the agriculture field officer. I collected information about the
agriculture loans details from their branches.
Analysis techniques:
The data
collected and presented in this report is of qualitative in nature. Because
most of the findings and analysis are inferential in nature. For example:
farmers might complain about the service provided by the bank, but we can
counter their complaint by asking other questions like their banking habit,
past loan details etc. Again by knowing the awareness level of farmers
regarding various agri-loan products, we can infer the successfulness of
government’s various programs.
CHAPTER – III
(Agricultural Banking in State Bank of India)
State Bank of India and its agricultural banking:
State Bank of
India, a public sector undertaking of government of India is the largest bank
in India in terms of assets and total deposits. State Bank of India and its
associates have more than 20000 branches spread across the country touching
every corner of the country. It has the deposits size of more than 12 lakh
crore rupees and it has given advances of 10 lakh crore rupees.
State Bank of
India adopts all technological innovations in its operation. Almost all of its
branches have core banking system. Last year it achieved most of awards in IBA
banking Awards. More importantly it won all the technology awards and it is way
ahead of all commercial banks in India. The major concern for it the NPA size
of more than 2% of total credit.
It is actively involved in community
service banking. Its business is more than banking because it touches the lives
of people anywhere in many ways. More important is the agriculture banking.
- State
Bank of India is the pioneer and market leaders in Agri-Financing in the
country with a portfolio of more than Rs. 1,20,000 crores in agri advances
covering more than 1.1 lakh farmer families. We cater to the needs of
agriculturists and farmers through a vast network of 10505 rural &
semi-urban branches.
- Apart
from the general branches, SBI has 428 Specialized Agricultural
Development Branches (ADBs) and 18 Agri Commercial Branches (ACBs) for
extension of high value credit to hi-tech agriculture, agri-related SME,
processing industry, etc.
- Its
branches cover a whole gamut of agricultural activities from Farm to Fork,
from the land preparation to post harvest management, processing and
marketing.To give special focus to agriculture lending, Bank has also
appointed agri-specialists in various disciplines to handle projects/
guide farmers in their agri-ventures. Advances are given to borrowers
ranging from very small activities covering poorest of the poor to hi-tech
activities involving large fund outlays.
- It also
has an effective marketing and recovery team in each region with
responsibilities for marketing and building relationships with dealers of
agri-products, organizing promotional events and for loan sanction,
processing, monitoring and recovery.
- With a
collective effort of Govt. and the people, itis set forth to catalyze
growth in the rural and agri areas and be the Banker to Every Indian.
Branches of State Bank of India have covered a whole
gamut of agricultural activities. Some of them are:
- Crop production, Horticulture, Plantation crops
and Forestry
- Mulberry cultivation, Rearing of silk worms and
grainages
- Allied activities like Dairy , Fisheries,
Poultry, Sheep-Goat andPiggery
- Land development and reclamation
- Farm mechanization and Refurbished second hand
tractors
- Digging of wells, Tube wells and Irrigation
projects
- Construction of Cold storages and Go downs
- Processing of Agri-products and finance to
Agri-input dealers
- Loans against pledge of warehouse receipts and
Loans against produce stored by the farmer at his own premises
State
Bank of India has a wide products range in agriculture loan sections. Those are
as follows:
·
Stree
Shakti Tractor Loan (SSTL)
·
Agricultural
Gold Loans
·
Kisan
Credit Card (KCC)
·
Produce
Marketing Loan
·
Kisan
Gold Card Scheme (KGC)
·
Setting
Up Of Agri Clinic &
·
Land
Purchase Scheme
·
Scoring
Model For Tractor Loans
·
Financing
Of Second Hand / Used Tractors Scheme
·
Financing
Power Tillers
·
Financing
For Combine Harvesters
·
Scheme
For Financing Farm Machinery Where Tangible Assets are Created
·
Dairy
Plus Scheme For Financing Dairy Units
·
Dairy
Society Plus Scheme Scheme for Financing Dairy Societies
·
Broiler
Plus
·
Scheme
To Cover Loans For General Purpose Under General Credit Card (GCC)
·
Sbi
Krishak Uthaan Yojna
·
Gramin
Bhandaran Yojna Capital Investment Subsidy Scheme for Construction / Renovation
of Rural Godowns
·
Scheme
For Financing Private Cold Storage / Private Ware Houses for Onlending to
Farmers
·
Scheme
For Financing Seed Processors
·
Mortgage
Loan To Seed Processing Units
·
Capital
Investment Subsidy Scheme for Commercial Production Units of Organic inputs
Under National Project on Organic Farming
·
Scheme
For Debt Swapping Of Borrowers
·
Arthiyas
Plus Scheme
·
Minor
Irrigation Schemes
·
Finance
To Horiculture
·
Financing
JLG Of Tenant Farmers
·
Scheme
For Financing Micro Finance Institutions (MFIs) / Non Government Organisation
(NGOs)
·
Sanjeevani
·
Krishi
Kalyan
·
Financing
For Organic Farming
·
Financing
JLG Of Tenent Farmers
CHAPTER - IV
Facts and findings
(Major Problems)
1. Own land vs. tenancy
The major
finding from the survey is the land holding and cultivation.
·
More
than 80% of farmers are small farmers
·
More
than 50% of farmers are tenants
·
More
than 90% farmers do single crop cultivation due to lack of irrigation
facilities
·
Paddy
is the only major crop cultivated in the region which the farmers use for their
own consumption
Majority of
farmers in the area I surveyed are small farmers having less than 5 acres of
land. Since agriculture is not productive in the region, most of the people
don’t do cultivation. They are in search of other way of income. They are
working as factory workers in nearby factories of kalinganagar industrial hub.
Most of the land remains uncultivated. So the case of tenancy comes to play.
Other landless people are approaching the landowners to cultivate their land.
In the process the tenant farmers are not doing cultivation in a productive
way. They are just living on this.
There are other
documentation processes required by the tenant farmers to avail agricultural
loan. By the process they are discouraged and not interested in agri-laon.
Particularly in
Jajpur Road branch of SBI, out of 1400 KCC loan holder very negligible almost
nil are tenant farmers. Bank is unable to convince the tenant farmers. So
special attention should be given to tenant farmers in terms of agriculture
loan.
2. Diversified Agriculture Loan
products:
State Bank of
India has more than 30 types of agricultural loan products. But in Jajpur Road
branch only few products such as KCC, Tractor loan, Gold loan, Self Helf Group
(SHG) are given to farmers. This is not achieving the goal. Some details about
the agriculture loan status in Jajpur Road branch is as follows:
As on June 2015
Loan
type
|
No
of A/C holder
|
Amount
(Rs. crore)
|
No
of NPA A/C holders
|
Amount
of NPA (Rs. Crore)
|
%
of NPA
|
KCC
|
1317
|
||||
Gold loan
|
268
|
||||
Tractors
|
51
|
||||
SHG
|
57
|
||||
Others
|
58
|
In the above
table the others loan type includes only one loan for pisciculture and one
diary loan. People are not encouraged to take other types of agriculture
activity rather they prefer to work as daily wagers. So customized loan
products should be available for the allied agriculture activity.
3. Product-Requirement mismatch:
India is a vast country
with different climatic conditions. Even within a district we found different
geographical areas like fertileplains of river area, hilly areas, dry areas
etc. The soil is different at different location. Accordingly the cropping
pattern varies. Different crops are cultivated at different places. The need of
farmers changes at different places. But the district level technical committee
on agriculture fixes common scale of finance for agriculture. The banks push
some agricultural products just to comply with priority sector norms. Farmers
may not get benefitted by this. But some are taking an opportunity to get some
fund by applying agriculture loan. They use this in areas other than
agriculture. So it is important to find out what farmers need for agriculture.
Jajpur Road
Kalinganagar region is semi-arid. No irrigation facility is available to
farmers. Agriculture in the region is rain-fed. Insufficient or untimely rain
cause damage to the only crop paddy. Farmers don’t get proper harvesting. So
they are discouraged to cultivate in subsequent years.
Again the bank
is giving priority to only KCC which is misused by the farmers. Farmers use
this loan in their personal use other than agriculture. The bank is pushing the
product only to comply with RBI’s priority sector guidelines. The very purpose
of agriculture loan is not fulfilled.
Why is KCC not important in the region?
·
People
are engaged in agriculture only for 4 to 6 months of a year
·
Next
six month they work in factories or other activities as daily wagers
·
The
income from other sources is more than that from agriculture
·
They
think agriculture as a secondary source of income
·
Most
of the farmers use KCC for their household needs other than agriculture
So to enhance
agriculture financing in the region bank should give special focus on other
types of products such as dairy, poultry, fisheries etc. People will have a
business bent of mind and they will not be diverted from agriculture.
Why is agricultural Gold loan not meant for farmers?
Again the same
story here. Bank feels it safe to give loan by pledging gold. But the poor
farmers have little gold. They have fear in their mind that they might lose the
gold to bank. From the study it is found that some well-off family are taking
advantage of the gold loan meant for farmers. Though anybody can avail it, it
is unnecessary to keep gold loan with other agricultural loan.
4. Agriculture not an investment
From the survey
it is found that the main crop in the region, paddy is not productive. Most of
the farmers say the paddy harvesting from one acre of land is 12 to 15 quintal.
As per the state government, minimum support price of paddy is Rs1200/quintal.
So in an acre the farmer gets only Rs15000 to Rs 18000. Most of the time
farmers sell their paddy to middlemen rather than to the government assigned
dealer. The price is less. Sometimes they sell at Rs900/quintal.
Again major part
of the harvested paddy is retained by the farmers for their own consumption.
When they take loan from the banks, they are unable to repay. Currently the
scale of service for paddy cultivation in the region as decided by the district
level bankers committee is Rs17500/acre. The amount is reasonable if the
farmers do cultivation in advanced way.
Farmers in the
region involve with agricultural activity only for six month that is the rainy
season and half of winter. Then they are off work. They go to work in nearby
factories or get temporary job in a town. They earn more from this work than
from agriculture. They can afford some cost for cultivation. Though this may
not be sufficient, they are living on this.
5. Local source of financing:
One question was
asked to the farmers about the source of financing the agricultural activity.
Majority of them arrange money on their own. Still some people depends on local
money lenders. A few goes to bank. The results is as follows:
As per a farmer
it is easy to borrow money from the local people than from the bank. But the
interest is very high. People say the interest rate is only 3paise. But the
bank rate is 11.85%. They are happy with such facility available locally.
The truth is:
Local rate of
interest is 3paise/month for an amount of Re.1
=Rs3/month
for Rs100
>=
Rs36/annum for Rs100
Local rate of
interest is more than 36% per annum. If we will apply the time value of money
the situation is worse.
The banks failed
to win the heart of the farmers. The farmers like to choose to be exploited
rather than going to face some cumbersome processes of banks.
6. Lack of banking awareness
Thanks to
PradhanMantri Jandhan Yojna. The process of financial inclusion got some
momentum. Almost all households in the region has at least one member having a
bank account. The government achieved its target. But the banks has yet to take
this opportunity. The banks get some deposits from the rural people, but they
could not convert them as a customer in the asset side. The reason is very
clear from the survey report.
·
Majority
of the households have bank account in the bank
·
80%
are farmers
·
90%
don’t know about various agriculture products. They only know banks give loan.
·
70%
people never approach any bank to take loan for agriculture
·
50%
farmers never think to take agriculture loan from a bank.
·
Some
of them fear to go bank. They have misconception that they might lose their
land.
·
Majority
don’t know the consequences of non-repayment of loan. They think agriculture
loan as an offer from the government.
It shows the
lack of awareness programs in the region to make farmers know about the details
about agriculture loan products. When the farmers don’t know what is available,
then how they will think of those.
For an example:
farmers are complaining about lack of irrigation facility. So they are doing
cultivation depending on rain. They are afraid of taking the risk. Again just
after rainy season they are off the work. So they search other source of
income. They sometimes work as daily wagers sometimes remain idle. Here KCC
fails. During the off time they can get work if they have poultry firm, dairy
firm etc. But very negligible avail such facility neither from bank nor from
the government.
One questions
was asked:
Does any bank
official/Government employee visit your village to make you know about various
schemes for agriculture?
The answers are
different:
·
Don’t
know
·
Maybe
·
Ask
the Sarapanch
·
Some
people came to our village to collect soil sample and they didn’t appear
All answers are
true. The government is more concerned about the farmers than the banks do. So
we set off priority sector lending policies for easy credit flow to the
agriculture sector. Apart from awareness program there are also other measures
to be taken. The government has a major role to play.
7. Proper use of fund
One question
comes to mind why the banks are hesitant to give loan to the farmers. It is
because of high NPAs in this sector.
Again when we
think why there is high NPAs in agriculture sector. Because most of the farmers
don’t repay in time or not at all.
Why the farmers
are not repaying their loan? Because they have no money. The story goes on.
Some findings
are:
·
Farmers
don’t think agriculture as an investment
·
Majority
of them do agriculture as a secondary source of income
One question was
asked to the farmers about the purpose of agricultural loan. Majority of them
could not give proper answer. Some of the answers are:
·
To
purchase fertilizers, seeds, pesticides etc.
·
To
purchase farm equipment like tractor, tiller etc.
·
For
business
·
For
daughter’s marriage
·
To
return money to the money lender
·
To return bank’s
old debt
·
To
purchase cattle
So the very
purpose of agriculture loan is not full filled properly. The fund is
mis-utilized. It continues the same old story.
8. Psychological barrier
(misconception):
There are news
in Haryana and Punjab and Uttar Pradesh about damage of crops due to untimely
rain. Farmers get loan waiver facility. There are cases of farmer suicide in
Andhra Pradesh and Maharashtra. The respective state governments compensate
them and relive some part of the loan given to the farmers. In 2008 most of the
farmers got benefitted from the loan waiver scheme irrespective of the amount
of crop loss.
Now there is a
general perception in the mind of people that the agriculture loan can be waived
at any point of time. They think agriculture loan as an offering from the
government. With this in mind the farmers deliberately delays the repayment of
loan. That make the situation worse.
Those people,
who are not doing cultivation or any other farm activity, are availing the bank
loan for agriculture. Those farmers who are the needy, are not taking bank loan
due to many reasons I have mentioned in the report.
9. Fear of bank loan
Long ago the
farmers were exploited by the landlords, moneylenders. They had to pay high
interest rate otherwise they had to lose their land. Due to evolution in
banking system and government’s initiative to formulate major policies farmers
are getting easy way of credit at a very less interest rate. Still farmers are
afraid of taking bank loan. Some of the reasons may be:
·
More
paper work
·
Farmers
have to submit land records in most of the cases original
·
Long
duration of processing. Even it takes months
·
Fear
of losing the land
One farmer from
Taharpur village complains that to get loan from State Bank of India is
difficult. So he prefers Andhra Bank. But Taharpur village is coming under the
service area of SBI, Jajpur Road branch. SBI should not ignore such minor
complains. State Bank should make awareness about such misconception.
10. Inadequate monitoring system
State Bank of
India might achieve the target of priority sector lending quota to agriculture
loan, but there is a high NPAs in this sector. This is a major concern for the
bank. Where is the fault line?
As there are
lots of issues in agriculture loan, so the NPAs can’t not be stopped. But
efficient management system can minimize it. For example: monitoring system.
Bank official should follow every stage of credit like:
·
Documentation
·
Purpose
of loan
·
Speed
sanction process
·
More
importantly the utilization of fund. The bank official should visit the area to
take a stock of the activity. So that problems can be found earlier.
·
Collection
of debt by reminding them the due date
Banks are
reluctant to give loan to farmers because of high NPAs.
11. Lack of government
initiatives:
Both state and
central governments have taken various measures for the welfare of the rural
people specially the farmer community. They have formulated various policies.
But various programs have yet to reach the rural people.
·
Farmers
don’t avail agriculture loan
·
Because
agriculture is not productive in the region
·
There
is no irrigation facility. So there are chances of crop failure
·
Distress
selling. Though governments have created minimum support price and opened Mandi
where the farmer can sell their crops, still there are lot of issues
Government has
to create infrastructure and facilities that will support the agriculture in
the country. For example:
·
Irrigation
facilities like canal, bore-well is important to stop drought or crop failure
due to lack of rain. Farmers can utilized their time in winter and summer
season
·
More
and more cold storages are to be set up to distress sale
·
Easy
availability of fertilizers, seeds etc.
12. Other problems
It is difficult
to find and solve everybody’s needs and problems. There are other problems
faced by the farmers while availing agriculture loan. Such as:
·
Involvement
of middlemen in the process create problems for the farmers. Though the
middlemen help the uneducated farmer in the process of documentation, they
charge an illegal amount of commission from them. The poor farmer does not get
the full credit amount.
·
Sometimes
the field officer deliberately delays the process. Farmers say it takes month.
They become demotivated by visiting the bank many times. Though there are so
many follow up processes, for a poor farmer the travelling cost and time is
important.
·
There is a rumor about bribery. Though no
farmer says it openly, they have in their mind that they have to pay something
to get the loan like it happened in other government services.
CHAPTER - V
Conclusions:
Agriculture is
an importance sector of Indian economy. Because a large population live on
agriculture. Around 50% of households consider agriculture as their prime
source of income. Again farmers feed the whole nation. The agriculture
productions guarantee our food security.
Though service
sector and Industry contribute more to Indian economy, but there is a large
customer base living in the villages. Without increasing the purchasing power
of rural people which constitute generally farmers’ family, the industry sector
may not grow that much. So to keep the balance in the economy it is important
to increase the living standard of the farmers and rural population.
To increase the
living standard of farmers, it is important to make agriculture productive and
profitable. So that farmers will be interested in farming. They should be
provided with easy financing along with the support of irrigation, farm
equipment, fertilizer, cold storage facility and a fair market. A fair market
can ensure justice to farming.
Till now the
middlemen are involved in marketing of farm products. They are getting better
profit than the farmers. A single middleman can take share from a large number
of farmers. He is getting profit. The farmers are left behind as before. So
distress sale is happening to stop distress sale, there is a kind of
agriculture loan product available with bank. But there is no taker of this.
Even the bank is not encouraging such type of loan. We find it at Jajpur Road
branch of State Bank of India. So as the largest bank, the State Bank of India
should think it like more of a social cause than banking.
We found there
are more tenant farmers in the region than the actual land owners. It is
difficult for a tenant farmer to go through the documentation processes. Again
the land owners are reluctant to make a legal agreement with the tenants. They
are giving their land to others because they have other source of income. And
the tenant farmers are not doing cultivation in a productive way. It is a
wastage of their time and labor. Nobody get benefit from this. Bank should find
a better way to encourage tenants and joint liability groups.
More
importantly, farmers are not acquainted with banking activities. They are not
aware of various loans and facilities available. Along with bank loan, the bank
should ensure proper awareness programs. There is no value to it.
From various
report, it is noticed that there is enough agricultural products produced in
the country to feed the whole population. The problem is it is not distributed
properly. In some areas, farmers are doing well. They are producing in an
efficient way with all the modern facilities. But there are some areas
cultivation is difficult due to water problem. In these areas farmers should
try other allied agricultural activities like poultry, diary, food processing
etc.Bank should find those places and should encourage farmers to take those
allied agriculture activities.
Recommendations:
It is difficult
to find out and solve each and every problems of farmers. Some problems are
linked with other problem which creates a chain of problems. For example;
farmers are not interested in agriculture. Because they find it is not
profitable. There is problem of irrigation facility in the area. They don’t get
quality seeds. Though government is working on this, but it is not sufficient.
So when bank is giving loan to any farmers, it should consider the suitable
loan products of region specific. The bank should not push a particular loan to
every farmers. Otherwise the loan will be non-performing asset.
For a balanced
and sustainable economy, farmers need finance for their overall growth. The
economic growth of farmers is necessary for the growth of the economy of our
country. Because the farmers are in the bottom of economic pyramid of the
country. They constitutes a large customer base. The sustainability of industry
and other sectors depend on the purchasing power of those people living at the
bottom. Again the farmers ensure the food security of the country.
From the survey
I found some common problems faced by the farmers while availing agriculture
loan. Some suggestions to overcome those problems are given here:
·
There
is an increase in the number of tenant farmers in the region I did my survey.
It is the case in the entire state. The tenants face documentation problems. Because
the land owners are hesitant to make an agreement with the tenants. Again the
land owner are afraid of losing their land in case the tenants fail to repay.
Also the tenants are doing cultivation just because they have surplus time.
They are not doing cultivation in a productive way. Bank should convince the
tenants by making them understand about the features of the loan.
·
There
is another problem regarding the requirement of loan to farmers as per their
need. Bank should not push a particular products in the region. Need of farmers
as per the geographical region is important. The majority of agriculture loan
holders are KCC. Apart from KCC there are also other type of loan.
·
Most
of the farmers don’t know the type of loans available in the bank are. They
only know that bank is giving loan for agriculture. They can’t think of their
requirements. So most of the farmers never approach the bank for a loan. They
live their life on their own. Bank should take necessary actions to convey the
features of agriculture loan to the farmers.
·
Along
with government official, bank field officer should visit the respective areas
to conduct awareness activity regarding agriculture and the features of the
loans. Then people will decide which loan is suitable for them. They may be
aware about various opportunity for them.
·
Most
of the farmers think agriculture loan is like other government offerings. They
take the loan and think that the loan will be waived at any time in future.
Most of them don’t repay in time. They think bank can’t take any action. The
bank should clear the misconception in the mind of the farmers.
·
Some
farmers think State Bank of India is like government organization. One
particular farmer said taking a loan from SBI is difficult. He does not know the
reasons. Bank should clear the misconception.
·
Another
problem is monitoring system. Bank gives loan to farmers to comply with
priority sector lending norms. Monitoring of proper use of fund is not
happening seriously. Farmers misuse the loan. Later they default. NPA
increases. Then bank blacklists those farmers. Bank think most of the
agriculture loan are bad debt. Bank official hesitates to give loan further. In
this case both farmers and bank suffer. So bank should form a proper monitoring
system like standard operating procedure.
·
Again
government has a lot to do to provide necessary support to farmers like
irrigation facility, quality seeds, free and fair market. Otherwise farmers
will not be encouraged to do farming. Then bank loan is useless to them
Annexure
Questionnaire
()
(To
find out problems faced by the farmers while availing agriculture loan)
1.
Personal Details (Optional):
Name: ………………………………………. Village:……………………………………..
Age: ……… Gender:
Male/Female Ph. No: ………………………
2.
Farm Details:
□ Land (In acre)……………… Irrigated: Yes/No
a) Own
Land b)
Tenancy
□ Crop:
Mono/ Double/ Multiple
□ Type of crops: …………………………………………………………….
□ Any other farm activities (like poultry, dairy,
food processing etc.)
□ Approx. Annual Income from agriculture (Rs.) …………
□ Approx. annual Expenditure in agriculture (Rs.)
……….
□ Source of financing agricultural activity:
a) Self b) Locally arranged c) Bank Loan d) Any
others……..
□ Do you face any financial problem for agricultural
activity? Yes/No
What problems?
How do you manage?
□ Last year how did you sell most of your
crops?
a) In the open
Market/Mandi b) Through the
middle man c).
Government purchase Centre d)
Other (Specify) ________________
□ In your opinion, is the agricultural income
sufficient to meet your household expenditure or does it fall short?
a) Sufficient b)
Falls short c) Can’t say
□ Do you do any other work to contribute financially
to your family?
3.
Banking Awareness:
□ Do you have any account in bank? Yes/No
□ Do you know about bank loan for agriculture? Yes/No
□ What kind of agriculture loan product do you know?
□ Have you approached any bank for agriculture loan? Yes/No
(if Yes) Have
you taken any loan for farming in the last five years? Yes/No
(if No)
Specify Reasons:
4.
Loan History of borrowers:
□ What kind of agriculture loan have you taken?
□ Are you satisfied with the service provided by the
bank? Yes/No
□ The loan you took for farming was used mainly for
which purpose?
a) To
purchase land
b) To
purchase fertilizers, seeds, pesticides etc.
c) To
purchase farming equipment like tractor, thrasher etc.
d) For
son’s business
e) For
daughter’s marriage
f) To
return money to the money lender
g) To
return bank’s old debt
h) To
purchase cattle
i)
Other (Specify)
___________
□ At what rate of interest did you take the loan?
………..
□ People say that they
face various types of problems while taking loan from Banks. How much
difficulty did you or your household members face while taking loan from a
bank?
a) Very
much b) Little c) No problem d) Can’t say
□ What kind of
difficulties did you face?
a)
Bank deliberately delayed the loan
b)
Bank was not transparent in passing the loan
c)
Bank’s interest rate was very high
d)
Bank official demanded money or other benefit
e)
Long paper work
f)
Other (Specify)
___________
□ Apart from agriculture have you taken a
loan/credit for any other work in the last five years?
□ Have you heard about government’s loan waiver
scheme? Yes/No
□ Have you ever benefited from the loan waiver
scheme? Yes/No
□ How often do you insure your crops - always,
sometimes, never?
a) Always b) sometimes c) never
□ What is the main reason for not opting for crop
insurance?
a) Shortage
of money
b) Insurance
policies not in favor of farmers
c) Don’t
Trust insurance companies
d) Never
felt the need for insurance
e) Lack
of information
f) Insurance
facility is not available
g) Landless
laborer
h) Never
heard about crop insurance
i)
Other (Specify)
___________
j)
Can’t say
5.
Repayment & Renewal of Agriculture Loans
□ Do you repay your loan in time? Yes/No
□ (if no) Reasons for not repaying loans:
□ Do you know the consequences of non-repayment of
loan? Yes/No
□ Did you renew your loan? Yes/No
(if No)
Specify Reasons:
□ Did you face any difficulty at the time of
renewal? Yes/No
□ (if Yes) Specify:
□ Are you satisfied with the information provided by
the bank? Yes/No
□ (if No) Specify Reasons:
□ Does the bank employee give you threat/ harass you
while collecting debt? Yes/No
6.
General Questions:
□ In your opinion what is the biggest problem faced
by farmers today?
□ On the whole are you satisfied or dissatisfied
with your current financial condition?
a) Fully
satisfied
b) Somewhat
satisfied
c) Somewhat
dissatisfied
d) Fully
dissatisfied
□ Is there any cold storage facility available in
your area? Yes/No
□ Then have you ever availed this facility? Yes/No
□ Then what is the main reason for not availing
the facility?
a) My
Crop does not require cold storage
b) It’s
Expensive
c) Cold
storage officials are not cooperative
d) Lack
of facilities in the cold storage
e) Cold
storage is too far
f) Don’t
trust such things
g) Other
(Specify) ___________
□ Do you think agriculture as profitable? Yes/No
□ Does any bank official/govt employee visit your
village to make you know about various schemes for agriculture? Yes/No
(if yes)
When and for what?
□□□□□□□□□□□□□□□
References:
1.
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