Payment of Crop Loans is Badly Hit due to Currency Shortage: WB Government

The State Cooperative Bank disburses funds to district level lending institutions to provide crop loans to farmers

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crop loan
Indian Currency. Pixabay

Kolkata, November 25, 2016: The West Bengal government on Friday said disbursement of crop loans had been badly hit due to currency shortage, leading to dearth of funds in the entire chain of crop loan disbursement.

West Bengal Cooperation Minister Arup Roy said: “Due to currency crisis, the West Bengal State Cooperative Bank received only about Rs 132 crore in the last two weeks against the requisitions of Rs 400 crore from the RBI regional office.”

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The State Cooperative Bank disburses funds to district level lending institutions to provide crop loans to farmers.

“Demonetisation and cash shortage has disrupted the funds flow to the State Cooperative Bank, 17 district central cooperative banks (DCCBs) and about 5,300 working primary agricultural cooperatives (PACs).

“There has been a dearth of funds in the entire chain of crop loan disbursement. The crisis could lead to crop loss and subsequently to a food shortage and spike in the food inflation,” the minister said.

The West Bengal State Cooperative Bank, which caters to 15 lakh current borrowers, received about Rs 77 crore in the last four days, which is “nothing against the demand”, he said.

West Bengal Cooperation Minister Arup Roy. Wikimedia commons
West Bengal Cooperation Minister Arup Roy. Wikimedia commons

“Last year, in November we disbursed about Rs 300 crore for crop loans and in the current month our crop loan target is Rs 350 crore. Due to fund shortage, we are likely to end up much short of the monthly crop loan disbursement target.

“Loan disbursement for the entire Rabi season is going to be affected,” said an official from the State Cooperative Bank.

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The State Cooperative Bank has set a crop loan disbursement target of Rs 2,500 crore for the Rabi season in the current year and of Rs 3,350 crore for disbursement of crop loan in the current year. It had disbursed Rs 3,008 crore crop loan last year.

“The supply of high-denomination currency notes also create a problem in the crop loan disbursement at the PACs level. On Thursday, we received Rs 20 crore from RBI, of which Rs 19.80 crore was in Rs 2,000 denomination notes. It is a practical problem for disbursement of crop loan,” the official said.

It is estimated that about Rs 35,000 crore would be required by the DCCBs for sanction and disbursement of crop loans to the farmers at the rate of Rs 10,000 crore per week.

“The National Bank for Agriculture and Rural Development, or Nabard, would be utilising its own cash credit limits up to about Rs 23,000 crore to enable the DCCBs to disburse the required crop loans to PACS and farmers,” the RBI said in a notification.

The RBI further said: “As many of these loans will be disbursed in cash to facilitate farming-related expenses, we advise in this regard that banks with currency chests should ensure adequate cash supply to the DCCBs and RRBs.

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“Adequate cash supply should also be ensured for rural branches of all commercial banks (including regional rural banks). Further, bank branches located in the agricultural produce market committees may also be given adequate cash to facilitate smooth procurement.” (IANS)

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