The finance minister has raised the bar for banking credit flow into agriculture sector for 2007-08. Commercial banks will have to lend Rs2.25 lakh crore worth of agriculture credit next year, about 20% higher than what they have done this year, which was Rs1.90 lakh crore.
The money will be lent at a concessional rate of 7% and banks will get 2% subsidy on firm loans from the government. There is a budget allocation of Rs1,677 crore for this subsidy.
Following this, 50 lakh new farmers are set to be brought under the purview of the banking system. Bankers are not happy with this arrangment, as they do not make money on such loans. “Our cost of money is more that at what price we lend to the small farmers and even the 2% subsidy does not take care of this. It should have been raised to at least 3%,” chairman of a public sector bank told Mint.
A special plan is also being implemented over a period of three years to 31 distressed districts in four states nvolving a total amount of rs 16,979 crore a bulk of which is going to be allocated to water related schemes. A portion of this is also going to be earmarked for the induction of high yielding milch animals. Currently 60 per cent of Indian farmers have no access to credit from commercial and cooperative banks and borrow at 36-100%.
Financial inclusion fund
Reiterating the need to bring the poor under the ambit of basic financial needs, the government has announced a financial inclusion fund to be established with the National Bank for Agriculture and Rural Development (Nabard) for meeting cost of developmental activities and technology adoption. Each fund will have an overall corpus of Rs500 crore the initial funding of which will be done by the Government, the Reserve Bank of India and Nabard.