Final burden of farm loan waiver on farmers: NABARD Deputy MD
He tells Ajay Ramanathan that a lack of infrastructure development in some eastern states is a significant challenge in addressing disparity in credit flow to agriculture. Excerpts:
Q. Will you issue any more social impact bonds?
A. We issued our first social bond in September 2023 with accepted issue size of Rs 1040.5 crore. The funds raised through this issue is used for refinancing existing drinking water projects financed by NABARD.
Considering the environment, social and governance (ESG) goals, the type of social and developmental activities entrusted with, and success of the present bond issued, we may further decide on the issuance of social bonds. If there is a requirement, we will definitely be issuing more such bonds, and this may be in the second half of the next financial year.
Q. What are the challenges in addressing the regional disparity in credit flow?
A. There is a lack of infrastructure development in some of the eastern states, which is one of the major causes of the limited credit absorption capacity of the people. This works as a vicious cycle – poor infrastructure leads to poor business opportunity and credit absorption capacity and dents productivity, leaving rural financial institutions in poor health.
There is an urgent need to address all the issues in these regions. We provide financial support for the development of rural infrastructure through the state governments. We also actively engage in strengthening rural financial institutions, promotion of innovative credit delivery mechanisms through self-help groups or joint liability groups, financial inclusion through providing technological support to cooperative banks and regional rural banks, extending financial literacy through camps, nukkad-natak (street plays), etc, providing improved agricultural practices to the farmers, skill development of youth for developing rural entrepreneurship, promotion of farmers collectives to leverage economies of scale, women empowerment through livelihood development and capacity building, natural resource management through watershed development, spring shed development, tribal development, and many more development activities.
Q. What is your agricultural credit target for FY25?
A. As per the government, the agriculture credit target for the current year is Rs 20 trillion. And the achievement as on January 31 2024 stood at Rs 20.39 trillion on a provisional basis. The agriculture credit target for 2024-25 is to the tune of Rs. 22.5 trillion.
Q. Has frequent debt reliefs to the farmers by the states impacted the repayment of loans availed?
A. NABARD’s research study on ‘Farm Loan Waivers in India: Assessing Motives, Challenges and Impact on Farmers in Selected States’ conducted by Bharat Krishak Samaj in 2021 highlighted that as an indirect effect of farm loan waiver, agricultural credit target and lending in the subsequent year are lower than the previous year. Therefore, the ultimate burden of farm loan waiver is also borne by the farmer.
However, in extreme natural calamity situations, where the crop loss takes place in continuous seasons, farmers need to be supported. For which there is need for strengthening the crop insurance and other need based support. Some states have come out with special incentive for prompt and regular loan payment by farmers. The government also provides incentive for prompt repayment of loans.
