An RTI filed by The Wire revealed that in 2016, state-owned banks gave out loans worth a whopping Rs 58,561 crore to just 615 accounts in 2016. Which means that on an average, Rs 95 crore was handed to each of these 615 accounts. The Reserve Bank of India, in response to the RTI query filed, gave out the information.
It is being alleged that most of these accounts belong to big companies which are involved in agribusiness, as they manage to take loans from banks at much lower interest under RBI’s Priority Sector Lending (PSL).
Priority Sector Lending
RBI’s PSL policy includes those sectors that affect a large part of the population, which is employment-intensive and weaker sections, like agriculture, micro-, small- and medium enterprises.
Under PSL, banks are required to reserve 18% of their total loans for the agriculture sector. As of now, farmers are given agricultural loans at the interest rate of 4%. There are three categories in the agriculture sector, which can avail loans as according to the PSL policy. These categories are Farm Credits, which includes short-term crop loans and medium/long-term credit to farmers; Agriculture Infrastructure; Ancilliary activities.
Founder of farmers’ organisation, Rythu Swarajya Vedika told The Wire, “Many big companies involved in agri-business are taking loans under the agricultural loans category. Companies like Reliance Fresh come under the agri-business company category. They engage in the buying and selling of agricultural produce, and take loans under the agricultural loans category for the construction of godowns or other such related activities.” Veesa further added that farmers are unable to avail the benefits of this loan facility since big corporates are eating up a huge percentage of these loans. It also seems to be a comfortable arrangement for the banks as well, as pointed by Agricultural expert Devendra Sharma. He said that it is much easier to hand out a loan of Rs 100 crore to one company than distributing it among atleast 200 people, wherein a lot of resources would have to be put to use to achieve the target of 18%.
“Has been going on for a long time”
While speaking to The Logical Indian Devendra Sharma said that this has been going on for a very long time. In his blog dated October 24, 2012, titled “Small farmers in India get less than 6% of farm credit. No wonder, farmer suicides show no signs of ending”, he quotes a Dainik Jagran report, according to which despite the increase in the farm credit, a very meagre amount was actually reaching farmers.
The blog also spoke of the ASSOCHAM report of September 2012 which called for urgent reforms in farm credit. The report stated that the effectiveness of farm credit was eroding because of “Misdirection in farm loans, increase in indirect credit, imbalances in credit between States and crops and misuse of interest”.
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