Possible that subsidised agricultural credit is being diverted: RBI

Mumbai: Reserve Bank Governor D Subbarao today said it is possible that subsidised agricultural credit is being diverted for other purposes and suggested modification of the scheme.

"Anecdotal evidence suggests that some agricultural loans, contracted at a sub-market rate of interest because of the subvention, are being diverted for non-agricultural purposes.


"This evidently defeats the objective of the subvention scheme and needs to be corrected either by remodelling the subvention scheme or through tighter monitoring of the end use of agricultural loans", he said.

Subbarao was speaking at a function here to mark the 30th foundation day of the National Bank for Agriculture and Rural Development (Nabard).

The RBI governor said he observed the trend during his recent visits to some bank branches in different parts of the country.

Therefore, there is a need to modify the interest subvention scheme under which the government subsidises interest cost for an agricultual loan and tighten the end-use factors while granting the credit, he said.

Due to interest subvention, farmers pay an interest of only four percent per annum. Meanwhile, Subbarao also suggested a discussion on the very idea of subsidising agricultural credit. The jump in banks' non-performing assets (NPAs) due to a migration to system-driven NPAs came under criticism from the Governor, saying the RBI doesn't understand what bankers mean by it. "I dont know what that means. There seems to be some new technology for system wide identification," he said.


Updated Date: Dec 20, 2014 11:31 AM

Also Watch

Watch: Firstpost test rides the new Thunderbird 500X in Goa and walks you through the Royal Enfield Garage Cafe
  • Tuesday, April 17, 2018 Varun Dhawan on Shoojit Sircar's October, 5-star reviews and working with Anushka Sharma in Sui Dhaaga
  • Saturday, April 14, 2018 Ambedkar Jayanti: Re-visiting Babasaheb's ideals exposes fake Dalit politics of Rahul Gandhi and Congress
  • Monday, April 9, 2018 48 hours with Huawei P20 Pro: Triple camera offering is set to redefine smartphone imaging
  • Monday, April 16, 2018 Rajyavardhan Singh Rathore interview: Sports can't be anyone's fiefdom, we need an ecosystem to nurture raw talent

Also See