The Major areas of Concern in Farm Credit in India
The major areas of concern in Farm Credit in India are listed below:
- Poor performance of cooperative credit structure.
- High cost of borrowing and complex lending procedure.
- The farmer can service credit only if the asset created out of loan yields more than the total cost of borrowing.
- Lower share of small and marginal farmers: The share of small and marginal farmers in operational holdings is around 80% of which the marginal farmers account for about 62%.
- The institutional credit sources have covered only around 4 crore farmers (that is 40% of the total number of farmers) leaving the rest i.e. among 60% (mostly marginal farmers) at the mercy of informal sources/moneylenders.
- Covering all the farmers within institutional credit fold.
- Imbalance in credit flow among States: Special efforts are required to be made by all banks in bringing more farmers under institutional credit fold in the East and North East regions.
- Raising the share of investment credit in total credit: Financing of agricultural investments results in capital formation in agriculture which in turn induces greater demand for production credit.
- Financing for high value crops: Greater attention is being paid to horticulture, floriculture, vegetables, and mushrooms, as the growth of these activities is in view of their contribution to nutrition and export earnings.
- Marketing Credits: The lack of good market and the consequent loss of a remunerative price have resulted in inadequate repaying capacity in the hands of farmers.
- Most farms served by banks are small family farms with less than $250,000 in annual sales.
- Only 17.7 percent of banks belonging to Farmer Mac actually originated Farmer Mac loans during the survey period.
- More than 60 percent of banks reported that Farm Credit institutions were lending to non-farmers in their area; the same percentage viewed FCS as their biggest competition.