With the State’s farmers expected to receive crop loans of at least ₹1 lakh crore for yet another year in 2020-21, there is a renewed debate over the efficacy of crop loans, in view of “aberrations” that characterise the pattern of this type of loans.
Institutions in charge of farm credit hold the view that Tamil Nadu is one of the States which have converted crop loans into “agricultural jewel loans (AJLs),” even though the loans are required to be provided only against land documents. Estimates vary regarding the proportion of AJLs in the overall crop loans, which are invariably provided outside the Kisan Credit Cards (KCC). A maximum of ₹3 lakh can be provided as crop loan.
The National Bank for Agriculture and Rural Development (Nabard), in its State Focus Paper (SFP) for 2020-21, which was released here on Thursday, identified the “predominance of agricultural gold loans” and “low share of agriculture term loans” as major issues faced by banks in the State.
A report of the Reserve Bank of India’s (RBI) internal working group, made public a few months ago, mentioned that 88% of the loans in the State were given outside the KCCs, despite the cards emerging as a preferred credit instrument all over the country for disbursing crop loans. The report attributed this feature to the AJLs.
Cheap credit
It is widely acknowledged that a chunk of crop loans go for non-farm purposes. A former banker says there have been cases of people taking crop loans to fund higher education of their children.
The main draw is cheap credit — the annual interest rate on AJLs is 4% if repaid within a year. It is to address this problem that the Centre has decided that interest subvention would be available only if the loans were linked to the KCCs. This had come into effect from October last year.
V. Sathyanarayanan, a veteran farmer from Tiruvarur district, says there are many issues that come in the way of crop loans being provided against land documents. More often than not, those taking agricultural lands of temples on rent manage the lands in an informal arrangement. This is widespread in the Cauvery delta. “Any insistence on land documents will only make the crop loans inaccessible to them,” he points out. Moreover, KCCs have not been adequately distributed.
A win-win deal
A senior banker, whose organisation has a huge presence in rural parts of the central districts, justifies loan against jewellery. Ordinarily, the banks, whether private or public sector, provide up to ₹1 lakh as crop loan, taking gold as collateral security.
The level of comfort is “very high” on the part of both banks and the borrowers. Any loan given beyond this figure was extended only against land documents.
As for the projections of credit outlay worked out by the Nabard for the coming year, the crop loans would be to the tune of about ₹98,000 crore and term (medium and long) loans, around ₹35,000 crore. The total would be nearly ₹1.33 lakh crore. The projected figures will be revised subsequently. For instance, the category of crop loans itself is expected to go up to nearly ₹1.3 lakh crore at the time of finalising the target for the coming year, in view of the target of over ₹1.18 lakh crore fixed for 2019-20. Eventually, the disbursal may exceed the target, which has been the case for many years.
