Karnataka Agricultural Policy - Institute for Social and Economic ...

Karnataka Agicultural Policy 2006
credit from the banks makes it difficult for the farmer to have an easy access to credit. Farmer is not
averse to payment of interest but the transaction cost of obtaining such credit itself is quite substantial,
in addition to the harassment. In order to wean back the farmer from the money lenders it will be
essential to iron out the differences in the interest rates across banking institutions as well as
procedures for obtaining credit. Following steps are suggested in order to increase the credit
accessibility and credit efficiency in Karnataka.
NABARD was established as a specialized institution to serve the credit needs of the agricultural
sector. It works under the Ministry of Finance even though the Ministry of Agriculture governs all
the activities of the agricultural sector. It is therefore not surprising that the decisions and policies of
NABARD are guided by the principles of Finance and Commercial Banking. It will be quite prudent
to put NABARD under direct control of Ministry of Agriculture and that will change the situation
and make credit sector farmer friendly. The State Government will advocate this point and at the
same time persuade NABARD to enhance its share in total agricultural credit.
The procedures of obtaining credit as well as rate of interest across different banking institutions will
be made uniform. NABARD and Commercial banks will be approached to get this done. A farmer
will be given a passbook in which all the entries about credit should be made, and it will be an
essential accompaniment for any application for credit. The basic information about a farmer will be
recorded in the passbook as elaborated earlier.
Farmer usually does not require bulk credit at the beginning of the agricultural season, but the
banking system provides lump-sum credit at one time. This results in diversion of funds to other
uses by the farmer as the funds are available right in the hand. Therefore, even though the total
amount should be sanctioned at the beginning of the season, the release of instalments should be
based on the type of activity undertaken at the farm level. Interest, however, should be charged only
for the amount withdrawn and utilized.
Whenever commercial banks are in financial difficulties, Reserve Bank of India helps them to come
out of these by following a set procedure. The same criteria should be applied to the District Central
Cooperative Banks. This matter will be taken up with the concerned authorities.
Commercial banks cater largely to the needs of the medium and large farmers, whereas cooperative
banks are accessible to all the groups of farmers. Thus, going by the very distribution of the land
holdings the small and marginal farmers are served by cooperative banks. Therefore, strengthening
the Cooperative banking sector will be taken on priority.
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