Agricultural Credit Policy in India - Need for Shift from Supply-Led To Demand-Driven Credit

In pursuance to the recommendations of the All India Rural Credit Review Committee [1969] the Government of India directed the nationalized banks including the State Bank Group & later on private sector commercial banks to finance farmers in order to significantly increase food output in particular and substantially raise agricultural growth rate in general. Government, also, adopted a multi-agency approach involving vast rural network of cooperative credit institution and regional rural banks. From time to time the Government introduced a plethora of directives virtually regulating the banks beyond one can expect. In the process, approach to agricultural credit policy in India and many developing countries since the 1960s has been “supply-led rather than demand-driven” which of course facilitated farmers to usher in Green Revolution. However, over a period of time this approach resulted into large-scale over dues building huge amount of non-performing assets, making banks financially unviable and forcing the Government to recapitalize them, among others. In this context, this development perspective article attempts to briefly highlight pertinent aspects of supply-led approach and suggests the immediate need to search & reinvent the agricultural credit delivery approach emphasizing demand-driven