Agriculture Loans in India Require Reforms and Reality Check to Lower Defaults

Agriculture loans in India have become a matter of concern for banks. It requires reforms and reality check to lower defaults.

Required Reforms

The increasing agriculture loan defaults are becoming a matter of concern for the banking sector. Citing this, chief executive of NBFC, Northern Arc Capital, stated the need to tweak bank rules. She said that farmers use agricultural credit for a non-agricultural purpose which makes this loan unproductive. Further, she stated that change in rules will help to bring down the number of defaults. She also mentioned that banks must lend to a diverse population instead of the same people in the same geography.

Loan to Agriculture, Small Businesses and Retail Sector

Banking experts say that banks have moved towards disbursing unsecured loans through issuing credit cards and personal loans. The majority of agricultural loans have slipped into NPAs. Further, retail assets quality has deteriorated and shown a rise in NPAs. Besides, the NPAs of MSMEs have increased lately. Apart from this, 17.9 percent of the total bank credit to corporate has been categorized as stressed. Loans against properties have also shown a declining trend owing to the slowdown in the economy.

Demand for Agriculture Loan Waivers

Congress demanded a nationwide loan waiver for farmers from the Modi government. Also, it alleged the BJP government of planning to end the MSP scheme which would force farmers to sell in the open market. Former Maharashtra CM Prithviraj Chavan said that the finance minister must clarify the status of the FCI and Agri Market Infrastructure Fund in this year’s budget. Moreover, the party alleged BJP for spending just 0.5% of the total amount of Rs 2000 crores allocated for AMIF. Besides, he highlighted high debts of FCI of around Rs 2.65 lakh crore.

Agriculture Loan Requirements

The agriculture sector of India needs sustainable programs rather than immediate reliefs. The government must take action to increase farmers income rather than providing relief through waivers. Further, proper storage facilities and e-platforms need to be efficiently managed to fully avail benefits to the farmers. Also, the government must see that marginal farmers are not left out from receiving benefits of schemes.

In all, there is a need to bring reforms in the agriculture sector to decrease agriculture loan defaults and increase farmers income by 2022.

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