What are the recommendations of the RBI internal working group (IWG) to review agriculture credit?
Published: September 26, 2019
The RBI internal working group (IWG) headed by MK Jain, Deputy Governor to review agriculture credit has made the following recommendations:
- Noting that there is no guarantee scheme available to banks to cover the default risk of borrowers the committee has suggested the central government to set up a credit guarantee fund for the agriculture sector in association with the state governments.
- The committee has suggested setting up of a federal institution with representation from both central and state governments similar to GST council to consult States and build consensus among them over reforms related to agriculture.
- Recognizing the fact that small and marginal farmers account for more than half of the total agricultural output at the national level and hold a major share in the high value crop production the committee has recommended enhancement in the sub-target for small and marginal farmers from the existing 8 per cent of adjusted net bank credit to 10 per cent with a roadmap of two years.
- The committee has suggested the central and state governments to undertake a holistic review of the agricultural policies and their implementation, as well as evaluate the effectiveness of current subsidy policies with regard to Agri inputs and credit, in a manner which will improve the overall viability of agriculture in a sustainable manner.
- The committee has also suggested avoiding the waiver of farm loans.
- Replacing the interest subvention scheme with direct benefit transfer to targeted beneficiaries such as small and marginal farmers, tenant farmers, sharecroppers, oral lessees, and landless labourers as individual borrowers or through self-help group/joint liability group model, with an overall limit of ₹3 lakh per individual farmer.
- Banks to provide crop loans, eligible for interest subvention, only through the Kisan Credit Card mode in order to curb the mis-utilisation of interest subsidy.
Implementing these recommendations will go a long way in addressing gaps in credit delivery to the agriculture sector.
Model Questions Category: 058 - Indian Economy Issues Relating to Planning