The Hindu : 'Suicide by farmers due to high interest loans'

Online edition of India's National Newspaper
Thursday, Dec 12, 2002

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'Suicide by farmers due to high interest loans'

By Our Special Correspondent

NEW DELHI DEC. 11. The Government today recognised the need for easing the norms for agriculture credit as farmers were committing suicides due to unaffordably high interest rates.

"Farmers are committing suicides because they are unable to repay their loans after harvesting the crop. Suicides may not be directly linked to crop failure, but to their inability to repay loans,'' the Union Agriculture Minister, Ajit Singh, said here today. Mr. Singh, who was inaugurating an All-India Conference of State Agriculture and Cooperation Ministers on Agriculture Credit and Crop Insurance, said despite the fact that the Reserve Bank of India had pushed the bank rate down from 11 per cent to 6.25 per cent over the last four years, the average lending rates of interest on farm loans still ranged from 14 to 16 per cent. This was much higher than the rate for housing, consumer and car loans at 9.5 per cent and that too at the doorstep.

In the context of declining interest rates in the banking sector, it was necessary that the rates charged from farmers be brought down substantially. The situation must be reviewed. Forty per cent of the loans in the farm sector were in the informal sources of credit, such as moneylenders, "arhatias" and commission agents, because of their easy availability.

"The Government has decided to increase the quantum of farm credit by more than three times in the 10th Plan period from Rs. 2 lakh crores to Rs. 7 lakh crores, but how this would be actually disbursed was anybody's guess."

He said the commercial banks, despite their recapitalisation, had not been able to fulfil the priority sector sub-target of 18 per cent for the agriculture sector.

The banks' achievement had been around 11.5 per cent of the net direct bank credit in the farm sector. Of their total credit disbursement in 2000, the banks disbursed only 10.1 per cent in the rural areas, 11.7 per cent in the semi-rural areas and about 78 per cent in the urban/multi areas.

The commercial banks generally viewed agriculture lending as a risky proposition despite the fact that the non-performing assets in the farm sector were lower than in other sectors. While Nabard had a crucial role to play in this area, the revitalisation package for revamping the cooperative credit structure was yet to be implemented in the States, Mr. Singh said.

The Minister of State for Agriculture, Hukumdeo Narain Yadav, emphasising the close relationship between credit and agricultural productivity, said the whole network of credit system needed to be fine-tuned to keep pace with the targeted growth in the sector. The Secretary, Agriculture, J.N.L. Srivastav, said the commercial banks were distancing themselves from small agricultural loans, and in such a scenario, bank rate reductions would not be accompanied by acceleration in agriculture credit. The case of regional rural banks was even more worrisome, as they were shying away from lending to the farm sector, for which they were primarily set up.

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