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Agri-financing

Sushmita Rao, e-mail

The news item ``Banks find a rewarding crop'' (Business Line, July 7) would have us believe that agri-financing is something of new growth area stumbled upon by banks. Farm-finance has always been a thrust area for banks and will continue to be in the fu ture, as India's is predominantly an agrarian economy despite the recent increase in the shares of the services and tertiary sectors in GDP.

The 1990s ushered in path-breaking policies in the direction of liberalisation and globalisation. These paved the way for substantial flow of investment into the services sector, both by foreign companies and home-grown ones, taking advantage of low-cost talents and skills to tap into the burgeoning information technology market in the West, especially in the US.

Unfortunately, these were also years of lower spending by the Government in public sector and infrastructural projects, resulting in a reduced flow of bank credit to the manufacturing and industrial sectors.

Confronted with the need for asset creation, banks, caught up in a whirl of the post-liberalisation hysteria, saw little virtue in the old-style financing of agriculturists; thus, farm-financing fell low in their lending priority. Cash-flows, corporates and capital were the buzzwords, and unless one was into financing corporates or structuring deals, one was not considered `in'.

The 1970s and 1980s saw many public sector banks recruiting farm graduates, including some with doctorates, to bolster their agricultural departments and elevate farm-financing to a higher levels. These employees were dumped mid-way and asked to `main-st ream' into general banking, without so much as a thought for their professional knowledge -- another pointer to the low ranking accorded to agriculture in the banks' scheme of things.

Simultaneously, the HRD policies of the banks also underwent mutations, and those handling the `unglamorous' tasks of financing agriculture or working in rural branches were not considered worthy of promotions.

It is good to know that it is back to basics for some of our banks, so far as lending priorities are concerned. But more than a change in their priorities, it is important to effect a change in the attitude and orientation of the bank officials. Most of the officials are urban-based, and a tour of duty at rural or agricultural branches is viewed as an unavoidable inconvenience in one's career path.

Many of them leave their families in the nearest urban centres and commute to and from there on a daily basis, leaving them little time to focus on the primary purpose of their posting or to understand the nuances of the rural ethos and working. Unless t hey are made to live in the rural areas, or where they are posted and reorient their attitudes, the change in priorities and seeing farm-finance as a viable option will end up as just so much brave talk.