Commercial Bank Finance to Agriculture in India-The Recent Trends and Issues

Timely and adequate credit at affordable rates is crucial to agricultural development, as in any form of productive activity. Agricultural credit was traditionally supplied in India by such indigenous sources of credit like the landlords, agricultural and professional moneylenders, traders, commission agents and relatives. While these sources had certain conveniences like easy accessibility and availability and absence of loan formalities, they had certain disadvantages such as high and usurious rate of interest, exploiting nature of the moneylenders, inadequacy, etc. In order to overcome these limitations and to make adequate credit available to the agriculturists, the modern credit institutions were developed in a multi-agency framework, the cooperative credit societies and banks, the regional rural banks and commercial banks forming the three components of this multiagency approach. Data show that it is the commercial banks which are the most popular and pre-dominant among these three sources. The Kisan Credit Card system introduced in 1998-99 is a recent innovation in the field of agricultural credit. The card is also made an ATM card recently. A serious problem in the field of agricultural credit is the increasing overdues, giving rise to the Non-performing Assets (NPAs) of the banks, resulting in loss to the lending banks, at the micro level, and waste of lendable resources, at the macro level of the economy. It is, therefore, necessary that the volume of NPAs is reduced through such measures like an objective assessment of loan applications, avoidance of over-financing and proper end-use supervision of the loan.