‘Hard to spot genuine farm loan seekers’

Distinguishing between wilful defaulters and genuine loan-seekers among small and marginal farmers is one of the challenges banks face in India, said experts, who wanted the Government to do more on this front.

“While we have almost 1,800 feet (people) on the street, we have a lot of difficulty in identifying potential beneficiaries. Digitisation of standard appraisal records is also negligible,” said Sarat Yadav, Deputy General Manager (Rural and Inclusive Banking), ICICI Bank, at a panel discussion during the ‘Inclusive Finance India’ summit, organised by Metlife Foundation here on Monday.

Here, banking sector representatives agreed that to bring in almost 80 million unbanked small and marginal farmers, there was need to find out how to identify genuine loan-seekers.

Arindom Datta, Senior Director and Head of Rural and Development Banking, Rabo Bank India, said domestic lenders did not have a clear picture of agricultural value-chains.

This, he argued, led to good farmers being left out since banks inevitably became cautious when farm loan defaults rose. He added that the system needed to be weaned off subsidies since it gave farmers an incentive to not repay loans.

The bankers also said that the loan waiver scheme for debt up to ₹50,000 announced recently by Andhra Pradesh and Telangana could adversely impact rural banking, with less farm credit availability and furthering of a subsidy culture.

IIM-Bangalore Professor Trilochan Sastry, who is also associated with the Association for Democratic Reforms and Centre for Collective Development, advocated the creation of a separate central fund, like the one provided for Operation Flood in the 1970s, to make agricultural profitable.

“Unless farming becomes profitable, rural banking won’t succeed. Small farmers today can’t get equity, so a separate social fund must be created. The Government needs to think agricultural in terms of a business model,” he added.

Sastry said collectivisation of farmers could see the cost of services going down and linkages improved.

He said banks did not want to lend to farmers due to a combination of low interest rates and abysmal repayment rates. “Cooperatives can help improve this problem, all the ones under us are profitable today. We were ruthless with wilful defaulters but sympathetic with the genuine cases,” he said.,