The priority sector lending implemented by public, private and Regional Rural Banks (RRB) as part of credit policy of Reserve Bank of India (RBI) is much relevant for poor States like Odisha where it can cover a majority of the population identified as potential beneficiaries of a credit based economic intervention.
This will bring positive changes in production, employment, income and make improvement in quality of life of a vast majority of people in rural area. But in spite of increase in credit flow to agriculture sector in post bank nationalization era, the disparity in flow of credit among regions and social groups remains a major cause of minimal impact over rural poor households. This needs a serious reflection by the State Government, financial institutions, banks and others.
Empirical evidence shows that the poor and landless share croppers and agricultural workers remain excluded in financial markets and the benefits mostly channels to the land-owning rich farmers and other economically affluent groups. Odisha still witnesses high incidence of poverty, chronic debt, distress migration, and small land holdings and agriculture sector is continued as main stake of the State economy which keeps engaging about 60 per cent of the people in a number of ways. The socio-economic condition and quality of life of a majority of people engaged in agriculture and allied activities has not been changing to a minimum standard in comparison to others. The Union Ministry of labour report on cost of living based on consumer price index 2014 says the cost of living of the agricultural workers in Odisha is one of the lowest in the country; Odisha is the third lowest higher than Bihar and Madhya Pradesh. In order to bring change in the rural economy, especially in agriculture and allied sector in Odisha, the priority sector lending policy and implementation process needs serious review to strategize further the credit need of people of the State in rural and tribal areas. Credit is being viewed as productive input which will boost production by bringing modern inputs and affirmatively contribute to food security along with controlling distress migration and unemployment. The RBI issues credit policy for the banks within which it has identified priority sector to bring sectoral balance within the credit disbursement and ensure easy, timely and adequate credit for the financially excluded people and the weaker sections.
The priority sector lending includes financing agriculture and allied activities, micro and small entrepreneurs, education and housing loans and others targeting the weaker sections, which depend on traditional money lending. The weaker sections include small and marginal farmers with landholding of five acres or less, share croppers, tenant farmers, landless labourers, artisans, village cottage industries, people with disability(PWD), SCs and STs, self help groups (SHGs), beneficiaries of NRlM, informal sector workers, manual scavengers, minority communities, and distress poor. The minority communities notified are Sikhs, Muslims, Christians, Zoroastrians, Buddhist and Jains etc. The RBI has identified 121 minority concentrated districts in the country and in Odisha, the Gajapati district is identified as a minority district. During the year 2013-14 , Rs 308.64 crore was disbursed to 24,219 minority account holders by all commercial banks in Odisha. It is equally important to take care of the minority communities within the weaker sections with equitable portion of the credit under priority sector lending. RBI notification says that 15 per cent of the total advance should be for weaker sections of the society and RRBs should have 60 per cent of the credit for the priority sector. Within this, half of the loan should go to small and marginal farmers possessing less than two hectares of land.
The loan can be provided to individuals or groups, SHGs or joint liability groups to meet the objectives and also to corporate, partnership firms and institutions for agriculture and allied activities that include dairy, fishery, piggery, poultry, beekeeping, plantation and horticulture etc. The rate of interest in agriculture is 7 per cent with 2 per cent Government subsidy and it further falls to 4 per cent in case of proper repayment. The loan to small and marginal farmers can be given to purchase land for agriculture purpose and other inputs such as agricultural implements, irrigation and other developmental activities undertaken in the farm. The various activities in pre harvest and post harvest periods, such as spraying, weeding, harvesting, grading, sorting and transportation, and exporting can also be covered under the activities. The common guidelines for priority sector loans say there should be no service change on loan up to Rs 25,000 and the bank has to maintain a separate register covering data on receipt, sanction, rejection and disbursement of data .The bank has to issue acknowledgement for loan applications. The loan applications by SCs and STs will be rejected by the next higher authority of the branch with sufficient reasons of rejection.
In the past few decades, the Central Government allocation on agriculture credit has been consistently increasing to meet the challenges of farmers in distress, struggling with a number of issues of crop loss, natural disaster, distress sale, including credit as a major concern. The agricultural credit flow for the year 2012-2013 was Rs 6, 07,375 crore, during eleventh plan( 2007 to 2012), it was Rs 19, 20, 400 crore and for the year 2014-2015, the Finance Minister has increased this to Rs 8.5 lakh crore. Along with this, around Rs 5,300 crore to support micro irrigation , watershed development and Pradhan Mantri Krishi Sinchai Yojana and Rs 25,000 crore rural infrastructure development setup in NABARD, Rs 15,000 crore long term rural credit fund ,Rs 45,000 crore for short term cooperative rural credit refinance fund and Rs 15,000 crore short term Regional Rural Banks refinance fund. There are also central schemes such as National Agricultural Insurance Scheme, Rastriya Krishi Vikas Yojana, National Food Security Mission, etc. The banks such as NABARD and RRBs, cooperatives such as Odisha Gramya Bank and Kalinga Gramya Bank have a major role in the implementation of priority sector lending in the State. NABARD projected a credit potential of Rs 36, 959 crore under priority sector during the year 2014-15. The Odisha SCs and STs Finance Development Cooperative Corporation limited has to address the credit needs of SCs, STs, scavengers and minorities in the State. But unfortunately, in the context of Odisha, the Central Government schemes and bank interventions remain with poor performance and slow progress. It is observed that there has been lack of sufficient branches in rural and tribal areas and the bank officials and beneficiaries have very less interaction on the priority sector purpose and procedures of loan.
Many of the prospective beneficiaries have no awareness about such facilities being provided under priority sector lending due to lack of information either by the Government or respective banks in their locality. In most of the cases, the banks in Odisha did not follow the orders of Government officials due to lack of monitoring and periodic review of the targets fixed by Government. It was also reported that many banks which were performing well in other States were performing very poorly in Odisha. The RBI has instructions that at least 25 per cent of the total number of branches opened by a bank during a financial year has to be in unbanked rural areas but this is not followed by banks in Odisha .They also are not being able to fulfil the other targets under priority sector lending in the State as a result of which many of the prospective beneficiaries are deprived of their right to credit for development.
(The writer is a researcher and rights activist, who can be mailed at manasbbsr15@gmail.com)