Public sector banks are aggressively engaging rural development officers and agriculture experts to provide counselling to farmers and bring them in the banking net.
At present, 60 per cent of farmers do not access institutional credit. Bankers have said that bringing more people under bank services will be a key criterion in assessing the performance of banks.
Though the government has set public sector banks a target of Rs 3.75 lakh crore for agriculture loans, very few farmers actually benefit from the scheme, as most still prefer non institutional sources of credit.
This is despite the fact that they are required to pay interest of less than 7 per cent for agriculture loans.
“However, since most farmers are not in the banking net, the benefit is not evenly distributed, and therefore, serves just a handful,” a senior finance ministry official, who did not wish to be identified, said.
The statements of intent that state owned banks have to submit to the finance ministry need to outline details on financial inclusion.
“Farmers need to be counselled and a system of joint liability must be developed to ease the pressure on them,” MS Sundara Rajan, chairman and managing director, Indian Bank, said. Indian Bank is planning to engage 250 agriculture field officers to provide the necessary inputs to farmers.
The official said that public sector banks are looking at various strategies to encourage farmers to seek bank credit. “Banks must engage ground level officials who could facilitate and counsel the farmers on the benefits of institutional credit, which comes at lower rates.”
In a bid to extend the scope of financial inclusion, Finance Minister Pranab Mukherjee, in his budget speech, had said that appropriate banking facilities to all villages with a minimum population of 2000 would be made available by March 2012.