What changed
RBI accepted and forwarded eight additional recommendations from the Vyas Committee on agricultural credit. Banks are advised to treat investments in wasteland/fallow land development as integral to agriculture lending. They are also asked to consider posting technical staff, using village intermediaries for credit delivery, financing good working PACS, adopting IT in rural branches, designing incentive structures, passing benefits to small borrowers, and associating with contract farming.
What it means for you
Banks must expand their definition of agriculture lending to include land development projects, potentially increasing loan portfolios. Using local agents like teachers and postmasters can reduce paperwork and improve recovery. Financing PACS and deploying rural ATMs opens new business channels but requires board-approved policies and infrastructure investments.
What you must do
- Collaborate with state governments to finance wasteland/fallow land development projects and treat them as agriculture advances.
- Consider posting technical staff at head/controlling offices and consider hiring agricultural graduates for rural branches.
- Consider using village school teachers, postmasters, farmers' clubs, or NGOs as direct selling agents for credit disbursal and recovery, subject to board-approved guidelines.
- Consider financing good working Primary Agricultural Credit Societies (PACS) based on commercial judgment and board policy.
- Formulate a time-bound IT adoption plan for rural branches, including low-cost ATMs and networking, ensuring reliable power and connectivity.
- Consider designing an incentive structure for prompt repayment and reviewing project appraisal procedures.
- Consider passing benefits of measures to small borrowers to make interest rates reasonable.
- Consider associating with contract farming subject to proper legal and regulatory framework.
Who it affects
All scheduled commercial banks, State Level Bankers' Committees (SLBCs), Rural branch managers and staff, Agricultural lending departments
What is the significance of treating wasteland development as agriculture lending?
It expands the scope of priority sector agriculture advances to include investments in converting wasteland and fallow land into cultivable land, potentially increasing banks' agri loan portfolios and supporting rural economic growth.
How can banks use village intermediaries for credit delivery?
Banks can engage village school teachers, postmasters, farmers' clubs, or NGOs as direct selling agents or business partners for loan appraisal, disbursal, and recovery, reducing paperwork and leveraging local knowledge.
What are the prerequisites for IT adoption in rural branches?
Reliable power supply, connectivity, bandwidth availability, proper facility management, and maintenance are needed. Banks must create a time-bound plan for deploying low-cost ATMs and networking computers.