Reserve Bank Deputy Governor K C Chakrabarty called for strengthening the share of rural credit in agriculture segment.
“The share of rural credit in agriculture has come down from 55 to 38 per cent now. But the share of metropolitan credit has gone up. But that will not add to productivity. We
need to see where credit is going,” Chakrabarty said.
He told a Ficci-IBA banking summit that credit flow to the farm sector cannot be achieved through bank branches or banking correspondents, but through improving the cooperative sector.
Pointing out the reason for declining farm credit, he said interest subvention is a reason for the slowdown in agriculture credit. He said pricing has to be market-based to ensure effective flow of credit to all sectors of agriculture.
To improve credit flow to the farm sector there is also a need for cooperation between the regional rural banks and primary agriculture credit societies, he said, adding there is also a need to improve marketing and distribution networks. To achieve this, he called for more involvement of private parties.
Chakrabarty further noted that the share of agriculture in the GDP has fallen to 14 per cent from 50 per cent about 15-16 years ago. But it still provides employment to about 60
per cent of the population.