“NABARD Chairman Highlights Rural Credit Formalisation and Growth Opportunities at Grameen Bharat Mahotsav”
New Delhi, January 5: India’s rural credit landscape is undergoing a transformative shift towards formalisation, with borrowers increasingly turning to formal sources for financial support. This trend, attributed to interest subventions and subsidised credit schemes, was highlighted by Shaji KV, Chairman of the National Bank for Agriculture and Rural Development (NABARD), at the ongoing six-day Grameen Bharat Mahotsav in Bharat Mandapam.
According to Shaji KV, the reliance on informal credit sources in rural areas is declining significantly. “The access of credit from informal sources is actually coming down very drastically. That means a formalisation of rural credit is happening. This formalisation leaves more margins in the hands of rural borrowers because informal loans typically come with higher interest rates, reducing profitability for borrowers,” he explained.
The introduction of schemes such as interest-subvented loans through Kisan Credit Cards, agri fund initiatives, and capping interest rates on informal loans has been pivotal in driving this transition.
Rural Consumption on the Rise
The formalisation of rural credit has also had a positive impact on rural consumption patterns. Shaji KV noted that rural consumption is outpacing urban consumption in terms of growth, reflecting robust demand in India’s rural pockets.
Looking ahead, the NABARD Chairman emphasised the importance of moving beyond primary agricultural production and focusing on value-added processing through comprehensive value chain development. Farmgate infrastructure development across the country is expected to support this shift.
Promising Growth in Agri Credit
Agricultural credit growth has been steady, averaging around 13% annually over the past decade. For the fiscal year 2024-25, Shaji KV projects an agricultural credit growth rate of over 13%, with an anticipated achievement of ₹27-28 lakh crore in agricultural credit disbursal.
Addressing Regional Imbalances in Agri Credit
The NABARD Chairman also addressed concerns regarding regional disparities in agricultural credit, particularly in eastern and northeastern India. He pointed out that the lack of digitised land records in these regions poses a significant barrier.
“For credit to grow, there needs to be a linkage of KYC with the activity being undertaken. In some areas, the absence of digitised land records is a challenge. To resolve this, the government is focusing on digitising these records,” Shaji KV stated, underlining the need for accessible data to empower banks to extend credit efficiently.
Comprehensive Approach to Agriculture Development
When questioned about the role of fertiliser subsidies in boosting agriculture, Shaji KV asserted that while fertiliser subsidies are beneficial, other factors such as irrigation, improved road connectivity, high-yielding crops, and credit availability at subsidised rates are equally critical for the sector’s growth.
Showcasing Rural India’s Potential at Grameen Bharat Mahotsav
The Grameen Bharat Mahotsav, a six-day event in New Delhi, aims to bridge the gap between rural producers and urban consumers. NABARD is showcasing various rural products, including Geographical Indication (GI) tagged items, organic goods, and products crafted by rural artisans, tribal communities, women entrepreneurs, self-help groups (SHGs), and farmer producer organisations (FPOs).
NABARD is also actively supporting rural artisans in marketing their goods through digital platforms, particularly the Open Network for Digital Commerce (ONDC). The ONDC initiative promotes open-source networks to facilitate the exchange of goods and services online, independent of any specific platform.
“We are working in different states with diverse groups to enhance their production capabilities and visibility,” Shaji KV remarked, reinforcing NABARD’s commitment to sustainable and equitable rural development.
A Vision for Rural Progress
As India’s rural credit system becomes more formalised, the benefits extend beyond financial inclusion, driving rural development, enhancing consumption, and boosting agricultural output. With initiatives like the Grameen Bharat Mahotsav and the digitisation of rural infrastructure, NABARD continues to play a pivotal role in shaping a sustainable and prosperous rural ecosystem.
