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State Bank of India improving credit lines for farmers

Lender expects good financial demand as monsoon planting begins

State Bank of India officials are meeting farmers directly to advise them on the reasonably priced banking services available. (Photo by Kiran Sharma)

NEW DELHI -- In Asawta, a village in the northern state of Haryana, about 100 farmers showed up one evening in early June to listen intently to what some State Bank of India (SBI) officials had to tell them about various agricultural credit schemes.

The encounter was organized by SBI's agriculture development branch in Haryana's Palwal district, some 65 km south of the Indian capital, and is part of the government bank's initiative to reach out to the agricultural community ahead of July's rice-sowing season by offering fresh loans and renewing old ones.

With another 15,500 SBI branches across India, similar meetings reached out to at least a million farmers. Among the schemes available is a kisan (farmer in Hindi) credit card that can be used to meet cultivation contingency expenses, and a loan facility backed by gold ornaments with an effective interest rate as low as 4%.

The nationwide SBI meetings coincided with farmers' protests in some parts demanding debt forgiveness and higher prices for produce. In the central state of Madhya Pradesh, there were reports of five farmers being killed when police opened fire on Tuesday during a demonstration.

The protest follows a move in April by the newly installed government of Uttar Pradesh state in the north under the control of the Bharatiya Janata Party (BJP) of Prime Minister Narendra Modi to waive agriculture loans totaling 363.59 billion rupees ($5.6 billion). The state government's decision benefited more than 21.5 million small and marginal farmers, and met a BJP campaign promise, but it prompted farmers in other states to also demand debt forgiveness.

The government has not been indifferent to plight of farmers. In this year's budget, about 1.87 trillion rupees were earmarked to help rural sectors, a 24% improvement on the previous year.

"Tell us if you are facing any problem," Anirudh Kumar Choudhary, the SBI regional manager for Palwal and Faridabad districts with 50 branches combined, told the Asawta farmers. "If the local branch doesn't hear you out, please contact me directly," he said. "I am a farmer's son and feel connected with you."

Most of those attending have only basic education up to eighth grade, but they are clear about their financial requirements. Brahmjeet Poswal, a village elder, said there is a need for soft loans to maintain agricultural machinery. "A farmer is able to buy a tractor with the bank loan, but he doesn't get any support for its repair or maintenance," he said.

The state-owned bank has laid down its national lending guidelines. "For crop loans up to 300,000 rupees, the effective interest rate is only 4% per annum, if the repayment is made on time," said Rajnish Kumar, managing director of SBI's national banking group. "We have instructed branches to actively pursue lending to farmers in line with the scale of finance fixed for various crops."

The meteorological department is predicting "normal" monsoons this year, and SBI therefore expects credit uptake to be good. The monsoon from June to September accounts for over 70% of annual rainfall, making it vital to rural livelihoods. Agriculture employs over half the workforce, but contributes only 15% to India's gross domestic product. The return to normal monsoons follows droughts that reduced agricultural growth to 0.2% and 1.2% in the financial years ending in March 2015 and 2016 respectively. The farming sector in many states remains stressed.

Debt-laden farmers

Pradeep Kumar, a school teacher in Asawta village who also farms, considers SBI interest charges farmer friendly. He said villagers who are unaware of the bank schemes tap other local sources and can end up paying 24-60% in interest.

"Most of the farmers are uneducated, but they are sending their kids to school now," Kumar told the Nikkei Asian Review. "Hopefully, the situation will improve."

Farmers complain about shortages of SBI staff near their villages, and how they are overburdened when farmers ask questions. Choudhary said the problem is being addressed through more frequent group meetings when frequently asked questions are answered.

"We also conduct night camps where we have dinner meetings with them and try to update them about internet and mobile banking, credit/debit card swapping machines, and other digital facilities," he said. "We tell them that they do not have to physically visit a bank branch every time, which they are doing right now."

Of Choudhary's 50 SBI branches, 12 service farmers. "We offer them crop-based loans, and also for buying tractors, buffaloes, poultry, and so forth," he said. "The problem is these people don't have much awareness about what they can get from us, so these interactive sessions need to be held on a regular basis."

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