Agricultural Credit

Agricultural credit target for FY09 set at Rs 250 billion compared with Rs 211.6
billion actual disbursement during FY08, up by 18.1 percent. However, during
Jul-Oct FY09, agri credit
disbursements registered an
increase of 16.2 percent (see
Table 2.2),9 significantlly
lower than the 27 percent in
the same period last year.
The relative slowdown is also
evident from a decline in
agri-credit disbursement
during Jul-Oct FY09 relative
to the annual target ratio
being the lowest in five years
(see Figure 2.7).
However, this is not a source
of concern given the
slowdown appears to be a temporary phenomenon; fertilizer off-take is expected
to rise from November onward for wheat crop cultivated in an extended area. In
addition, even at this moderated growth rate, FY09 agri credit disbursement target
is estimated to be met comfortably.
A disaggregated analysis suggests that the deceleration in agri-credit growth is
entirely attributed to a weaker rise in production related loans during Jul-Oct
FY09, as disbursements for developmental purposes increased strongly. In fact, a
weak disbursement of production related loans is also a reflection of weak
fertilizer demand in this period. An institution-wise break-up shows that a sharp
increase in these loans by the specialized banks help offset the impact of weaker
growth in disbursement by the commercial banks during Jul-Oct FY09.
The breakup between the farm and non-farm borrowing showed a steady increase
in the share of non-farm sector, rose to 34.3 percent in Jul-Oct FY09 from 27.9
percent in Jul-Oct FY08.