Examine why majority of Agriculture credit provided by Indian banks under priority sector lending, does not accrue to small and marginal farmers.

As per a report submitted by the RBI to the Parliamentary Standing Committee on Agriculture in response to its queries, only 42.2% of agricultural credit disbursed in 2016-17 went to small and marginal farmers. This is a serious issue, given the need for credit by such farmers and, under the present intensity of agricultural stress. The issue is related to GS 3 syllabus under the following heading-

Major crops cropping patterns in various parts of the country, different types of irrigation and irrigation systems storage, transport and marketing of agricultural produce and issues and related constraints; e-technology in the aid of farmers

Key demand of the question.

The question wants us give an account of and bring out the reasons for poor disbursal of credit under priority sector lending to small and marginal farmers in India.

Directive word

Examine- we have to write down the key reasons behind the low disbursal/ accrual rates of credit to small and marginal farmers under PSL. We have to look into the details and accordingly frame our answer in alignment with the demand of the question.

Structure of the answer

Introduction– Mention the recent RBI report which highlights the percentage of agricultural credit disbursed to small and marginal farmers under PSL.

Body– Discuss in points the main reasons behind the low rates of disbursal. Try to give a balanced answer, keeping in mind the concerns of all stakeholders, including banks.

E.g poor credit rating and worthiness of small and marginal farmers, high concentration of banks in agriculturally developed areas and towns and low concentration in areas where most of the small and marginal farmers live, political pressure to disburse loans to usually big farmers, shortage of staff and time on part of banks etc.

Conclusion– suggest a way forward- e.g Under the priority sector lending the mandate is not to reach a particular type of farmer therefore mandating necessary sub-targeting of small and marginal farmers, nudging private and foreign banks in this direction, motivating bank employees and relaxing quantitative targets while enhancing qualitative ones, using SECC and aadhar for proper targeting etc.