Fact Checking Government claims on ‘Affordable Credit’ to Farmers
Sai Krishna Muthyanolla
January 31, 2019
The BJP government published an infographic on the 48-months portal that makes two claims about affordable credit being provided. This is part of a larger sub-section of claims made about doubling farmers’ incomes. This article is a fact check of these claims.
The BJP government published an infographic on the 48-months portal that makes two claims about affordable credit being provided. This is part of a larger sub-section of claims made about doubling farmers’ incomes. This article is a fact check of these claims.
What are Joint Liability Groups (JLGs) for farmers?
Joint liability groups amongst farmers were first introduced as a pilot project by NABARD (National Bank for Agricultural and Rural Development) in the year 2004-05. NABARD’s annual report for the year 2004-05 notes  ‘absence of adequate security is sometimes a major hurdle in securing loans for small and marginal farmers and people from other poorer sections. The inability of this section of people to provide collateral often excludes them from the purview of credit cover. Keeping this in view, a pilot project on financing Joint Liability Groups (JLGs) was initiated for developing effective credit products for mid segment clients, which reduces risk and transaction costs for the bank and also introduces a greater degree of flexibility for the credit user to determine credit needs and priorities.’
The annual report also notes ‘a JLG is an assembly of 5-10 member clients (new or existing), informally recognized by the bank as a group. The group members offer an undertaking to the bank that enables them to jointly receive such amounts as deemed eligible by the bank for pursuing any activity – individually or jointly – as found suitable by the group. The group serves as collective guarantor for loans extended to individual members by executing joint liability agreements, making them severally and jointly liable for repayment of loans.’
How many JLGs have received loans from Banks & what is the extent of such loans?
The first claim is that 24.53 lakh joint liability groups were provided Rs. 26,848.13 crores loan by banks across the country as of 31st march, 2017.
An answer in Lok Sabha states ‘to bring small, marginal, tenant farmers, oral lessees, etc. taking up farm activities, off-farm activities and non-farm activities, into the fold of institutional credit, Joint Liability Groups (JLGs) have been promoted by banks. The announcement of Union Budget for 2014-15 for financing of 5 lakh JLGs of ‘Bhoomi Heen Kisan’ (landless farmers) has given further credence to efforts of NABARD in innovating and reaching out to the landless farmers through JLG scheme of financing.’
The same response also states ‘as on 31st March, 2017, cumulatively 24.53 lakh Joint Liability Groups (JLGs) have been provided Rs. 26,848.13 crore loan by banks across the country.’
It also has to be noted that the concept of forming JLGs and financing these JLGs is not new and was implemented during the UPA itself. As per NABARD’s 2013-14 annual report, the cumulative loan disbursement as on 31 March 2014 was Rs. 6,075.91 crores to 6.58 lakh JLGs.
Claim: 24.53 lakh joint liability groups were provided Rs. 26,848.13 crores loan by banks across the country as of 31st March, 2017.
Fact: As on 31st March, 2017, cumulatively 24.53 lakh Joint Liability Groups (JLGs) have been provided Rs. 26,848.13 crore loan by banks across the country. Hence, the claim is TRUE. However, it has to be noted that this scheme was formulated in 2004-05, during the UPA and was implemented during UPA’s tenure. As per NABARD’s 2013-14 annual report, the cumulative loan disbursement as on 31st March 2014 was Rs. 6,075.91 crores to 6.58 lakh JLGs.
What about the Interest Subvention scheme?
The second claim is ‘under the interest subvention scheme, short term crop loans up to Rs.3 lakhs were extended at an interest rate of 7% per annum for up to one year.’
According to a response in Lok Sabha, ‘NABARD & RBI raise claims with the Government under its Interest Subvention Scheme (ISS), wherein interest subvention of 2% per annum is provided to Public/Private Sector Banks (PSBs), Cooperative Banks and Regional Rural Banks (RRBs) on their own funds used for short-term crop loan up to Rs. 3 lakhs extended to farmers at a subvented interest rate of 7% per annum for a period of one year and a further 3% interest subvention to farmers provided as incentive on prompt repayment.’
NABARD’s 2010-11 annual report states that, ‘interest subvention of 1.5% per annum was available to public sector banks, co-operative banks and RRB for deploying their own funds for crop loan up to Rs.3 lakh per farmer, provided the ultimate borrower got such loans at 7% interest rate per annum. Additional subvention of 1% announced in the year 2009-10 to those farmers who repaid crop loans promptly within one year of disbursement was enhanced to 2% during 2010-11.’
While this proves that ISS schemes are not new, NABARD’s annual report of 2011-12 states that, ‘the continuance of the interest subvention scheme was announced in the Union Budget 2011-12, making interest subvention available at 2% per annum to public sector banks, co-operative banks and RRBs for deploying their own funds for crop loan up to 3 lakh per farmer, provided the ultimate borrowers were given loans at 7% interest rate per annum. Additional subvention of 3% was announced for 2012-13 to those farmers who repaid crop loans promptly within one year of disbursement.’  This further proves that the specific provisions of the ISS scheme, as it exists today have been instituted much before the BJP government and the same are being continued by the current government.
Claim: Under the interest subvention scheme, short term crop loans up to Rs. 3 lakhs were extended at an interest rate of 7% per annum for up to one year.
Fact: While the statement & numbers are true, the specific provisions of the Interest Subvention Scheme (ISS), as it exists today have been instituted much before the BJP government and the same are being continued by the current government.  Hence, the claim is MISLEADING.