Number of farmers taking loans down

Despite increasing loan disbursements in the last three financial years, the number of farmers who were financed by banks have declined considerably.

The number of farmers financed during the last three years were 41.3 million, 38.5 million and 39.7 million in 2004-05, 2005-06 and 2006-07 respectively.

However, the loan disbursements to farmers have increased by 44 per cent to Rs 1,25,309 crore (Rs 1253.09 billion) in 2004-05, by 44 per cent to Rs 1,80,486 crore (Rs 1804.86 billion) in 2005-06 and by 13 per cent to Rs 2,03,297 crore (Rs 2032.97 billion) in 2006-07. Loan disbursements stood at Rs 1,20,062 crore (Rs 1200.62 billion) in April-October of 2007-08.

Perplexed by the trend, the National Bank for Agriculture and Rural Development (NABARD) is conducting a study at the ground level to examine this mismatch with the help of expert bodies such as Gokhale Institute of Politics and Economics, Xavier's Institute of Development Action and Studies and Indian Institute of Bank Management. Once the study is completed, the reasons for the mismatch between the number of accounts financed and credit disbursed would be known, an official source said.

The decline in the number of farmers financed was steep in the case of cooperative banks. Loans financed by cooperative banks have declined from 22.5 million in 2004-05 to 19.3 million in 2005-06 and further to 18.9 million in 2006-07 due to inherent weakness of the cooperative credit structure.

One of the main reasons for the reduction in the number of accounts is attributed by the officials to the multi-purpose Kisan Credit Card (KCC).

KCC is a composite loan facility, which includes components for production, consumption and investment purposes. Since one KCC account effectively covers three accounts, this has also led to a decrease in the number of accounts financed.

Similarly, loans issued during the kharif and rabi seasons were treated as two separate loan accounts earlier. However, with the introduction of KCC, the same are now treated as a single account, the official said.

With the increased emphasis on providing finance to the rural poor under a group mechanism such as a self-help group, presently a 'Group Account', effectively covers a number of farmers, thereby affecting the growth in the number of accounts financed, officials added.