The government should consider offering “livelihood loans”, say up to ₹50,000, to rural poor as the lingering pandemic appears to be taking a toll on the nascently recovering rural economy, which has seen tepid growth in nominal wages, according to State Bank of India’s economic research report “Ecowrap”.

This loan may be given on the premise that interest-servicing alone will keep the loan standard with subsequent loan renewal linked to successful repayment record, according to the report put together by the economic research department (ERD) of India’s largest bank.

“If government were to bear, say, 3 per cent interest subsidy, on a portfolio of ₹50,000 crore, the outlay would be only ₹1500 crore during 2022-23, And these loans will also act as a big consumption booster at subsistent levels,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.

Boost economy

Given the significant success of vaccination during the third wave in rural pockets, the livelihood loans can be the silver bullet catapulting the broader economy to unprecedented highs, he added.

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The additional advantage of these micro-livelihood loans is that they will help the banking system prepare a comprehensive database and credit history of marginal borrowers that can be further leveraged to create new credit-worthy borrowing classes, the report said.

The ERD suggested that the present overdraft facility for PMJDY (Pradhan Mantri Jan Dhan Yojana) accounts in banking system, in existence for sometime, can be streamlined and tech enriched with a central nodal agency/ bank to monitor and promote the scheme meaningfully.

Decline in real rural wages

The report noted that the decline in growth of real rural wages since FY17 is a concern particularly in the pandemic era accentuated by tepid growth in nominal wages (from ₹298 per day in FY17 to ₹364 per day in FY22).

The ERD opined that after two years, the terms of trade in agriculture have once again gone against farming due to high inflation, notwithstanding projected growth in farm sector at a robust 3.9 per cent in FY22.

Further, as per ERD’s estimate, the per capita agricultural GDP (in current prices) was around ₹55,000 while Non Agriculture per capita GDP was ₹2,20,000 in FY21.

Subdued deposit growth

A closer look at the quarterly All Scheduled Commercial Banks data from RBI in recent past, coupled with SBI’s internal market trends analysis and dissection of quarterly results released by banks foretells the asymmetrical growth in deposit accretion across various geo-population groups as the lingering pandemic appears to be taking a toll on the nascently recovering rural economy with a strong likelihood of subdued sequential deposit growth in Q3 at rural centres.

Even the metro regions, with largest chunk of deposit base, are expected to show lesser growth in the preceding quarter though here the reasons could be more affiliated to allocation towards capital markets/other assets classes by domestic investors, who have of late anchored the buying on dips prophecy as FIIs press sell button, the report said.