Flexible financial solutions needed to meet farmers’ specific needs: RBI DG
Source: Business Standard
RBI DG Swaminathan Janakiraman
Since traditional lending practices have limitations in catering to the needs of the agricultural sector, which is inherently seasonal, with returns often delayed or reduced, innovative financial solutions that are flexible and tailored to the specific needs of farmers are necessary, said Swaminathan J, deputy governor, Reserve Bank of India, on Monday. Additionally, crop insurance products that cover weather-related risks can help mitigate the uncertainties farmers face.
Speaking at the International Research Conference, Swaminathan said, “…blended finance models—where public funds are used to leverage private investments—can be instrumental in providing the necessary capital for sustainable transitions. This would not only mobilise resources from multiple sources but also distribute the risks and returns more equitably.”
He highlighted that institutional credit to agriculture reached an all-time high of Rs 25.10 trillion during FY24. Approximately 74 million active Kisan Credit Cards have emerged as vital tools for providing timely and flexible credit, especially for short-term needs. “However, addressing regional disparities in access to credit remains critical,” he said, adding that if it is ensured that all farmers, irrespective of their location, have access to adequate and timely financing, we will be better positioned to address the challenges of sustainability and resilience in agriculture.
Meanwhile, he also underscored that sustainable practices like organic farming, climate-smart technologies, and modern irrigation systems may seem costly upfront, but they offer long-term benefits by improving productivity, resilience, and environmental stewardship.
“Without accessible and affordable financing options, the much-needed shift to sustainable farming practices will remain a distant dream for many,” he said, adding that sustainable finance should not only promote environmentally friendly practices but also ensure that financial resources are available to the farmers who need them most, providing equitable access to tools, technology, and knowledge.
Additionally, Swaminathan said that going forward, two critical issues must be addressed: promoting sustainable agriculture and ensuring adequate funding for it.
Institutional credit has grown significantly, but regional disparities persist. Value chain financing and warehouse financing offer potential solutions, while government initiatives like the Agri Infrastructure Fund, Pradhan Mantri Formalisation of Micro Food Processing Enterprises Scheme (PMFME), and Animal Husbandry Infrastructure Development Fund (AHIDF) are helping drive agricultural growth, he said, adding that a concerted focus on addressing regional imbalances, enhancing credit access, and integrating value chain financing is crucial for a more sustainable and resilient future for Indian agriculture.
First Published: Sep 16 2024 | 7:06 PM IST
