Agricultural credits in the Northeast

Easy access to agricultural credit from banks and cooperatives plays a crucial role in agri cultural production, increasing farmers' income and protecting them from risks and burdens of high interest loans in informal credit markets. The latest 'Report on trend and progress of banking in India -2021-22' released by the Reserve Bank of India highlights that North-eastern states have the lowest number of operative Kisan Credit Card (KCC) and the lowest outstanding loan amount in the country. This indicates that a large section of farmers in the region has failed to derive benefits of access to formal credit markets. Poor credit flow explains dominance of subsistence farming in the region even though individual success stories such as tapping domestic and export markets are galore. The KCC scheme was introduced in 1998 to provide adequate and timely credit support from the banking system under a single window through simplified procedure for farmers (individual/joint borrowers who are owner-cuItivators), tenant farmers, oral lessees, sharecroppers, Self Help Groups or Joint Liability Groups of farmers including tenant farmers and sharecroppers. Farmers can avail loans from banks for agricultural input expenditures as purchase of seeds, fertilizers, pesticides and meeting other financial requirements during various stages of farming, post-harvest expenditures, household consumption requirements, working capital for maintenance of farm assets and investment credit requirement for agriculture and allied activities.Timely payment of dues against KCC loan makes the farmer eligible for 3 per cent subsidy which makes the effective rate of interest only 3 per cent and in case of default in payment the interest rate is capped at 7 per cent. The RBI report shows that number of operative KCCs in the region decreased to 10.58 lakh in March, 2022 from 11.41 lakh in 2021, but outstanding credit increased to Rs 5,384 crore from Rs 5,099 crore. Assam accounts for 62 per cent of operative cards and 72 per cent of outstanding KCC loan amounts in the region, but the gap in KCC overage against operational holdings in the state is still very wide. Bridging this gap can facilitate more farmers to avail KCC loans and expand their agricultural and allied activities which will go a long way in strengthening the rural economy. In 2020, against 27.41 lakh operational holdings in Assam there were 9.08 lakh KCC holders and the gap in KCC coverage was 18.33 lakh. As in March, 2022 the operative KCC cards reduced to 6.58 lakh from 7.37 lakh, but the outstanding amount marginally increased to Rs 3,896 crore from Rs 3,755 crore. Compared to the total outstanding amount hovering around Rs 5,000 crore in the Northeast, the amount in the northern region is Rs 2.16 lakh crore, Rs 1.19 lakh crore in the western region, Rs 3.32 lakh crore in the southern region, Rs 2.08 lakh crore in the central region and Rs 56,378 crore in the eastern region which speaks volumes about the scope of KCC scheme in increasing access of farmers in the Northeast region to formal farm credit markets. This can be possible if implementation of KCC is taken beyond meeting targets of coverage and raising awareness among small and marginal farmers in the region about the benefits and accessibility of farm credits under it. Registration of farmers under PM Kisan scheme brought to the fore the problem of large number of farmers being not covered under the KCC. PM-Kisan is a Central sector scheme with 100 per cent funding from the Central government under which an income support of Rs 6,000 a year is provided to all holding farmers directly to their bank accounts. The special drive undertaken since 2020 under 'KCC Saturation Drive'to provide KCC to all PM Kisan beneficiaries not covered under KCC brings opportunity for states in the Northeast to increase KCC coverage and increase the number of operative cards to increase agricultural investments by farmers in the region. The states in the region addressing problems of irrigation, marketing, cold storage, connectivity from farm gates to markets etc., will be critical to farmers showing interest to avail KCC loans to increase production and expand allied activities. Complexities in land ownership, more particularly in hill states with community ownership of land, also create a critical bottleneck for most farmers in the region in availing KCC benefits and government completing land survey in an expeditious manner and digitizing land records can improve KCC coverage and use. Farmers getting remunerative prices for their produce is vital for repayment of dues. Without an assured return on crops grown, the farmers are not keen to take the risk of taking loans from banks for the apprehension of defaulting in payment. Increasing paddy procurement by Food Corporation of India and state agencies at Minimum Support Price, therefore, becomes essential to ensure remunerative prices to farmers and boosting confidence to increase investment in agriculture for augmenting household income. Bank and cooperatives can play a crucial role in raising the awareness among farmers on benefits of KCC among farmers in the region.