Mumbai: State-run banks are grappling with their next task — advancing fresh farm loans — after overseeing the first phase of the government’s massive Rs71,680 crore debt write-off. They have run into one problem right away: a shortage of personnel to deal with rural borrowers.
Fine-tuning act: A Punjab National Bank rural branch in Rohtak, Haryana. As the shortage of agriculture officers threatens the implementation of new farm loan programmes, banks are starting a recruitment drive.
Rural development officers, or RDOs, are meant to appraise farm loan proposals and act as an intermediary between farmers and banks. The shortage of these officials goes back to a freeze on recruitment in the 1980s, worsened by the voluntary retirement scheme, or VRS, of 2001.
The agriculture sector has been particularly hit hard by the departure of 11% of public-sector bank staff who accepted VRS, aimed at cutting flab and saving on costs. Bankers say the shortage of RDOs is “huge,”?although?Mint?couldn’t ascertain precise numbers.
“An RDO acts as a friend-philosopher and guide to farmers,” says K. Laxman Rao, general manager for the priority-sector lending division at Union Bank of India. “Apart from helping farmers in harvesting, they also guide them to channelize their extra funds to banks, thus bringing business for us.”
RDOs not only disburse loans to farmers but also act as collectors, requiring them to live in the villages where they operate.
To be sure, a shortage of workers is not peculiar to banks in the world’s second fastest growing economy. From retailers to research institutions and construction firms to software exporters, companies have been complaining of the difficulties they face in finding and hiring skilled employees.
But the problem threatens to set back the efforts of state-run banks to meet lending targets in rural India, home to two-thirds of the country’s 1.1 billion people. About 43 million farmers benefited from the debt write-off.
Under the Reserve Bank of India (RBI) guidelines, banks are required to channel 40% of their advances to agriculture, small and medium enterprises and small entrepreneurs, billed as priority-sector lending. The share of agricultural loans is 18%.
Public sector bankers say it is difficult to get graduates or postgraduates with a degree in agriculture to fill the shortfall of RDOs because people are either reluctant to head to villages or are enticed by higher salaries offered by the private sector.
The emergence of food malls retailing fresh vegetables and other perishable products has created jobs for agriculture graduates in handling farm procurement and storing.
An agriculture officer in a public sector bank typically earns a salary of Rs13,000 per month. The private sector is offering between Rs15,000 and Rs30,000, bankers said.
Banks are now fine-tuning loan programmes targeted at farmers. Bank of Baroda recently withdrew a debt-swap scheme for farmers and is working on another, said a bank official. The official, who did not wish to be named, denied the withdrawal was linked to a shortage of personnel. But other bankers say a shortage of officers often makes it tough for lenders to implement credit plans for farmers.
Under RBI guidelines and prodded by the Central government that has put rural India at the forefront of economic policymaking, banks have introduced a slew of measures to help farmers. A new loan scheme seeks to swap farmers’ debt to moneylenders.
Union Bank of India is one of many banks that has introduced crop loans with a debt-swap rider under which a farmer gets 120% of the loan applied for. The extra 20%, or Rs1 lakh, whichever is higher, is available to swap the farmer’s debt with moneylenders.
Public sector banks charge 7% interest on all farm loans up to Rs3 lakh, while moneylenders charge around 20-36% and even higher.
Punjab National Bank (PNB) also has a debt-swap scheme that allows a farmer to swap up to Rs50,000 of debt with moneylenders. The bank is in the process of introducing one more scheme which will allow farmers to swap their debt with not only moneylenders, but also traders and suppliers of agricultural inputs.
As the shortage of agriculture officers threatens the implementation of such programmes, banks are starting a hiring spree although the job market may be tight.
State Bank of India (SBI), which hires agriculture graduates on a contractual basis, recruited about 2,800 people in the last three months. According to an official at the bank, India’s largest, SBI will hire 3,000 people next year. There are about 4,500 agriculture graduates working for the bank.
Union Bank plans to hire 1,000 rural development officers in two years. PNB is in the process of hiring 75 agriculture officers. Bank of Baroda recently recruited 89 such officers for its rural and semi-urban branches.
Most banks are planning on-campus recruitment to entice fresh agriculture graduates.
“This is a very specialized job. We badly need experts in the field as otherwise we need to train a person for two-three years,” said Gobinda Banerjee, general manager for priority sector lending at PNB. And “unless farmers feel comfortable with a bank official who is like a friend to them, they will not come to the banks,” Banerjee added.