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LATEST NEWS UPDATES | 98% households in villages under debt: Study -Sarbjit Dhaliwal

98% households in villages under debt: Study -Sarbjit Dhaliwal

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published Published on Aug 7, 2014   modified Modified on Aug 7, 2014
-The Tribune


Chandigarh: One of the main reasons for a large number of suicides in the agriculture sector is debt. It is an established fact that Punjab farmers turn to non-institutional sources of credit despite a large network of banks in the state.

At least 52.77 per cent rural households in the state are dependent on non-institutional sources for loans, says Dr Satish Verma, Professor, Reserve Bank of India Chair, CRRID. He says the demand for credit for productive and consumption purposes from non-institutional sources is high in villages that do not have banks.

He says the decision-makers must keep in mind the interest of the landless, marginal cultivators and craftsmen while designing a credit policy for the rural sector.

"Rural indebtedness in Punjab is high with 98 per cent households under debt. Each household has an outstanding debt of Rs 4.79 lakh or 96.73 per cent of its annual income. The challenge to institutional sources mainly comes from commission agents (arhtiyas). They mediate between the cultivator and food procuring agencies, lend money to farmers and supply inputs to the cultivator. It is this dependence of the cultivator on the commission agent which makes him an easy pray," contends Verma.

He says that for the larger benefit of the farmers, cooperative societies, as an institutional source of rural credit, must be strengthened.These should be promoted as marketing agencies (as an alternative to commission agents).

A study by Verma shows that in rural Punjab, merely 52.81 per cent adults have a bank account and only 25 per cent-30 per cent adult females have an account. It shows that 72.50 per cent labourers, agricultural and non-agricultural, have taken loans from commission agents and big landlords.

In villages with banks, non-institutional sources charge less interest on loans for consumption purposes (18 per cent) than on agricultural loans (18-36 per cent), In villages without any bank, the interest rate for consumption purposes is 18-60 per cent and for agricultural purposes 24 per cent. In these villages, landlords and the moneylenders charge the highest rate of interest.

Verma says indebtedness, particularly among the marginal/small and medium farmers, is very high. A way out could be increasing the share of institutional sources in rural credit, expanding the banking network in villages and reducing the dependence of the cultivator on the commission agent. Barriers in the flow of institutional credit ought to be minimised, says Verma.

"Cultivators should be helped in selling their produce directly to the purchaser," says Verma.

Some solutions

Cooperative societies, as an institutional source of rural credit, must be strengthened
These should be promoted as marketing agencies as an alternative to commission agents
A way out could be increasing the share of institutional sources in rural credit
Expanding the banking network in villages and reducing farmers' dependence on arhtiyas
Minimising the barriers in the flow of institutional credit
Cultivators should be able to sell their produce directly


The Tribune, 5 August, 2014, http://www.tribuneindia.com/2014/20140806/punjab.htm#2


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