Transcript overviewagriculturex - College of Agricultural Banking

OVERVIEW OF THE RURAL
SECTOR
&
LENDING TO AGRICULTURE
R N Panigrahi ,GM & MoF
ACA-TM-37 (v2.2-20-Nov-10)
Profile of the rural economy
• Characteristics of the rural economy
– The agriculture sector
• Its importance in the economy
• Growth in agriculture production
– The rural non-farm sector
• Diversification
• Emerging opportunities
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Some facts on agriculture
2008-09
2009-10
2010-11
2011-12
Growth in agri -0.1%
0.4%
6.6%
2.8%
Contribution
to GDP
15.7%
14.6%
14.4%
14.0%
Total GDP
growth
6.8%
8.0%
8.5%
6.5%
Target for agri
growth
4%
4%
4%
4%
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Some more facts on agriculture
Growth in agriculture in 2002-03 to 2004-05
was 0.89%
Export contribution by agriculture—10.2
58% of population employed in agriculture
 Provides demand for other sectors
Provides raw materials for some industries.
Vital for containing food inflation
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Problems of the rural economy
• Resource development
– Land – fragmentation, low productivity, conversion
– Water resources
• Dry-land agriculture
– Manpower resources
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Low skill levels
Low mobility/Migration
Low productivity
Non-availability
– Capital scarcity
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Problems of the rural economy
• Infrastructure development
– Rural roads, bridges, market yards etc.
– Irrigation
– Power supply
– Communication network
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Problems of the rural economy
• Lack of access to financial services
– Saving services
– Insurance services
– Remittance services
– Credit services
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Policy for the rural economy
• The goal : Integrated rural development
• Role of the Government
– Poverty alleviation / employment generation
programmes – credit linked and others
– Creating a conducive environment for development
• Role of non-governmental organisations (NGOs)
• Role of financial institutions
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Rural lending - Features
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Greater dispersion of the clientele
Seasonality of rural activities
Rigidity of agricultural cycles
Small size of the transactions
Lack of borrower assets
Absence of standardized information
Greater exposure to risk
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Rural credit
• The multi-agency approach to rural credit
• cooperatives, commercial banks, RRBs, LAB
• Credit from institutional and non-institutional sources
– AIDIS 1991
• Non-institutional sources – 30.6%
– AIDIS 2002
• Non-institutional sources –38.9%
• Change in policy stance since 2004
– Targets given for the banks
– Interest subvention for Public Sector Banks
– Extended to Pvt Sector scheduled commercial banks from 2013-14
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Rural credit
• The cooperatives – strength and weakness
• The Commercial Banks – shift in priority ?
• The Regional Rural Banks (RRBs) – establishment,
development and current position
• Consolidation of RRBs
• Local Area Banks – limited role
• ICT based BC model of banking
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Business distribution as on Aug
2011
Category
Branches
Deposits
Advances
Rural
37.2%
9.2%
7.5%
Semi-urban
23.7%
13.5%
9.6%
Urban
20.7%
20.7%
16.7%
metro
18.5%
56.6%
66.3%
Total in absolute
terms
86,960
45,61,029 crore
33,45,169 crore
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Rural credit - The commercial banks
• Lending to priority sector
– Composition of the priority sector
• Agriculture
• MSE
• Other priority sector areas
– Target and sub-targets
• Agriculture – Direct and indirect
• Weaker sections
• MSE targets in terms of y-o-y growth
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Lending to agriculture
• Achievement of target
– Shortfall in achievement
• RIDF deposits
• Penalty provisions
• Reasons for non-achievement of target
• Focus on direct lending
• changes in PS guidelines since July 2012.
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Ground level credit flow in
Agriculture
2008-09
Agency
No of
A/Cs
(in lakh)
CBs
Amount
2009-10
(in crore)
No of
A/Cs
(in lakh)
202.45
(44)
2,28,951
(76)
Coop
178.18
(39)
RRBs
Total
(in crore)
No of
A/Cs
(in lakh)
(in crore)
205.30
(43)
2,85,800
(74.3)
233.94
(41)
3,32,706
(74.4)
45,965
(15)
203.92
(42)
63,497
(16.5)
260.17
(46)
70,105
(15.7)
75.47
(17)
26,764
(9)
73.08
(15)
35,217
(9.2)
72.03
(13)
44,702
(9.9)
456.1
(100)
3,01,908
(100)
482.30
(100)
3,84,514
(100)
566.14
(100)
4,47,513
(100)
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Amount
2010-11
Amount
Lending to agriculture
• Special Agricultural Credit Plans (SACP)(since1994-95)
– Performance monitored on the basis of disbursements,
not outstanding credit
– Detailed state-wise and activity-wise plans
– Production credit, investment credit and indirect finance
– Self-set targets for disbursement
– Targets fixed by showing an increase of about 20 to 25
per cent over the disbursements made in the previous
year
– Reviewed by RBI
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Steps in Budget 2013-14 for promoting
agriculture
 Agri target for 2013-14 increased to 7,00,000 crore.
 Interest subvention scheme for crop loan to
continue.
 Interest subvention extended to SCBs in pvt sector.
 Matching equity grant to be provided to Farmers
Producer Organisations
 Credit Guarantee Fund to be created in Small
Farmers Agri Business Corporation
 Rs 10000 crore set aside for National Food Security.
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Lending to agriculture
• Opportunities
– From agriculture to agri-business – the on-going
paradigm shift
– High-tech agricultural projects – floriculture, horticulture
etc.
– Allied activities (poultry, fishery, animal husbandry etc.)
– Plantations, forestry, wasteland development etc.
– Financing the entire value chain – farm to fork
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Lending to agriculture
• The issue of profitability in rural lending
• Risk management in agriculture
– Yield risk
– Price risk
– Agriculture insurance
– Other measures to address risk in agriculture
• Role of Futures Markets
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Legal changes facilitating agricultural activities
Model APMC Act
Warehouse (development and regulation) Act
2007
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Lending to agriculture
• Innovations
– Kisan credit card
– Self-Help Groups – micro credit
– Farmers’ Club
– Joint Liability Groups
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Approach paper to 12th plan(2012-17)
• Finance PACS through CBs
• Agri to grow at annual rate of 4%
• Total credit requirement to be double that of during
the 11th plan.(about 8 lakh crore per annum)
• Creation of rural infrastructure including soft
infrastructure.
• Credit widening along with credit deepening
• Aggregation methodology to take in SF/MFs
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Approach paper to 12th plan(2012-17)(contd)
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Investment credit to be increased by aggregation through PACS
Development of soft infrastructure
Increasing insurance penetration in livestock from 7 to 30%
Single insurance policy for farmer covering all his assets.
Enable SF/MF to take part in future market
Contract farming through amendment in APMC Act
Issue of no title to land of SF/MF
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Other issues
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Issue of mindset and motivation/ HR policy of banks
ICT in rural lending
Expanding outreach of banks in the rural sector
Sachet banking
Financing value chain
Primary production to value addition
Borrower information sharing
Technology for information dissemination
R & D activities and extension network
Water management
Legal support for recovery
Risk management
Land laws and land-leasing/absentee land lord.
Land acquisition for non-agricultural purposes
ACA-TM-37 (v2.2-20-Nov-10)
THANK YOU
For your
Attention
ACA-TM-37 (v2.2-20-Nov-10)