A large number of farmers are not covered under institutional credit in some districts

Only about 18.71 lakh farmers are set to benefit from the ₹9,448 crore farm loan waiver scheme announced by the Karnataka government in the cooperative sector. The small number is an indication of the fact that a large number of an estimated 78 lakh farmers continue to remain outside the institutional credit system. This is attributed to the weak financial condition of several district credit cooperative (DCC) banks in the State.

DCC banks that have fewer deposits and fewer members — especially in Kalaburagi, Dharwad, Shivamogga, Kolar, and Chitradurga — have left a large number of farmers outside the ambit of cooperative credit.

With low deposit rate, these DCC banks have limited money for advancing loans. Of the estimated 78 lakh farmers in the State, 20.37 lakh farmers have taken loans from the cooperative sector and an estimated 28 lakh farmers have availed themselves of loans from nationalised banks. The rest have remained outside institutional credit.

“In these districts, the coverage of farmers is an average of 25% to 30% while in districts such as Uttara Kannada almost 90% of the farmers are covered under the cooperative credit system. Over the last five to seven years, the increase in membership has been very slow or almost stagnated,” said Cooperation Minister Bandeppa Kashempur.

Big farming districts such as Shivamogga and Kalaburagi have far fewer farmers availing themselves of loan from the cooperative sector when compared with the total number of farmers in the districts.

“In Kalaburagi, advances have been around ₹250 crore while it is around ₹175 crore in Shivamogga. Ideally, district banks here should have performed better, given the sheer number of farmers in the districts. Our estimation is that just about 10% of farmers in Kalaburagi are under the cooperative system,” said the Minister, and added that the these DCC banks, which also have to drive up deposit rate, have not done much.

Mr. Kashempur said that efforts were on to bring at least 10 lakh farmers under the cooperative loan segment from the next financial year by offering deposit support through Apex Bank to weaker DCC banks. “We are looking at increasing deposits from the APMCs. We want to ensure fund of at least ₹25,000 to new members to start with,” he said.

Sources in the government said that the current farm loan-waiver programme will reveal the correct figures of farmers coming under the institutional credit system, as many farmers would have availed themselves of loan from both cooperative and commercial banks.

Reduced refinancing to be blamed for the woes

The woes in the cooperative sector lending are attributed partly to reduction in refinancing of loan by the National Bank for Agriculture and Rural Development (NABARD).

Over the last few years, NABARD refinancing — as part of a policy decision — has come down progressively from 55% to 40%. This increased the burden on the district credit cooperative (DCC) banks to raise their contribution towards the loan. Appeals by the State to NABARD to increase the refinancing rate have been turned down.

For the record, NABARD refinanced ₹3,450 crore of the total ₹10,571 crore lent through primary agricultural cooperative societies (PACS) during 2017–18 while Apex Bank and DCC banks advanced ₹3,019 and ₹3,851 crore, respectively. Some profitable PACS used their own funds to a tune of ₹53.77 crore.

Unless fresh infusion of funds happen to the DCC banks, expanding the membership base is likely to cause more trouble than help farmers, sources in the cooperative banking sector said. With limited funding available for the DCC banks currently, the resources are being spread among the existing members, which may or may not be sufficient.