Maharashtra: How Mumbai grabs a lion share of the agricultural credit in the state

General secretary of the All India NABARD Employees Association, Rana Mitra makes a strong case for robust and fair credit (low interest loans) to Maharashtra’s most needy regions and  farmers

1. In Maharashtra, there are 53 crore operational holdings covering 205 lakh ha. with an average size of 1.34 ha per holding. 79.52% of the operational holdings are small and marginal holdings with a holding size of less than or equal to 2 hextraes. These small holdings face various challenges related to fragmented l.and Of the total 307.58 lakh hectares geographical area of the State, the gross cropped area (GCA is 241.49 lakh hectares while the net sown area is 165.90 lakh ha. The cropping intensity is 145 per cent as on March 31, 2023. The rainfall in the State varies from a heavy 4000 mm in the Konkan region to barely 500 mm in North Maharashtra. The gross irrigated area of 43.38 lakh hectares forms only 18 per cent of the gross cropped area in the state. 

2. There are 28 Commercial Banks with 11,905 branches, two Regional Rural Banks with 742 branches and Short Term Co-operative credit structure comprising Maharashtra State Cooperative Bank and 31 DCCBs with a branch network of 3,564 branches. There are 20,930 Primary Agriculture Credit Societies in the State affiliated to the DCCBs. Further, there are eight Small Finance Banks with 733 branches, 03 Payment Banks with 46 branches and one foreign bank with 29 The total branch network of the State is 17,019, comprising 5,779 rural  branches (34% of the total bank branches are located in the rural areas) and a per-branch population of 10,652 in rural areas. The Bank of Maharashtra functions as the Convener   of the State Level Bankers Committee (SLBC).

3. As per trends in Ground Level Credit Flow under Priority Sector in Maharashtra, disbursement under Agriculture has shown an increase from Rs. 67,914 crores in 2018-19 to Rs. 1, 45,040 crores in 2022-23. The total under priority sector has grown from Rs. 3,16,755 crores in 2018-19 to Rs. 5,49,397 crores in 2022-23, registering a compound annual growth rate of 11.64% in the last five.

4. For 2023-24, ACP envisages a total credit flow of 6,51,401 crore under Priority Sector, of which Rs. 1,68,481 crore is under agriculture sector.

5. The total deposits of the banks in the State stood at Rs. 34.95 lakh crore as on 31.03.2023, registering an increase of 11.52% over 31.03.2022. Mumbai (suburban and city) with 14% of the branches (2,344 out of 17,019 branches in the State) have 58% of the deposits. The total advances outstanding as on March 31, 2023 in the state stood at ₹65 lakh crore, registering a Y- o-Y growth of 23%.

6. The CD ratio of the State as on March 31, 2023 was 96%. However district wise CD ratio indicates that CD ratio in Mumbai and Mumbai suburban being traditionally high were 151% and 53% respectively. Gadhchiroli district continued to remain credit deficient with a CD ratio of below 40% in 2022-23. Further, the CD ratio of the state without Mumbai and Mumbai Suburban was only 71%. 

7. There are certain interesting trends in total disbursement of agri-credit in Maharashtra as noted in 2022-23. Out of total agri-credit disbursement of Rs. 1,45,040 crores in 2022-23, the share of commercial banks is Rs. 1,15,382 crores (79.55%), followed by Rs. 24,499 crores by cooperative banks (16.89%) and Rs. 5159 crores (3.55%) by RRBs. Though, it generally follows the national pattern of disbursement of agri-credit by banks, the share of cooperative banks in disbursement of agri-credit at nearly 17% of the total bucks the national average of 12% of agri-credit being disbursed by cooperative banks in 2022-23. 

8. But, a very disturbing trend in the disbursement of agri-credit and of the total priority sector is noted in Maharashtra like in many parts of India, where urban branches of banks, for example in Mumbai, disburse more agri-credit than many a rural, semi urban centres, indicating that a significant portion of agri-credit might have reached to big corporates for agri infrastructure (even may be for construction of malls, masquerading as silos). If we take the disaggregated data, we find the following trend: 

The trend noticed in Priority Sector lending is even more disturbing and heavily skewed in favour of city like Mumbai (having only 2 districts), as the banks distribute Rs. 252179 crore out of total of Maharashtra of Rs. 549397 crore, forming 46% of the total in 2022- 23, the highest percentage among all the regions of the state.

9. Low level of irrigation coverage leading to lower crop productivity and mono-cropping, as reflected in the cropping intensity of the State at 145%.

10. Area under sugarcane cultivation and production of sugar/ethanol in Maharashtra is witnessing a rising trend, compared to production of coarse grains and cereals in general. Sugarcane is produced by mostly using the groundwater sources and hence, poses a challenge especially in water scarce regions of Micro irrigation for Sugarcane cultivation is a necessity.

11. Erratic rainfall, climatic variations, small land holdings, non-availability of labour and higher input cost resulting in reduced productivity and income for farmers can be tackled by promoting region specific Integrated Farming Systems, collectivization of small farmers into FPOs, cooperatives, crop advisories and contingency.

12. Weak financial health of rural cooperative institutions which have the highest outreach to Out of the 20,930 PACS in the State, 8,803 PACS (42%) have reported imbalances¹ of Rs. 5,094 crore against the outstanding (principal and interest) of Rs.14,162 crore as on March 31, 2023.

Large number of marginal and small farmers do not have clear titles to the land they till, which acts as a deterrent in availing institutional credit and adversely impacts the borrowers ‘capability to access adequate credit. There is a need to increase coverage of crop loans by financing new farmers, particularly SF/MF, tenant farmers, share croppers, etc., by organizing them into JLG/SHGs and more coverage of Kisan Credit Cards (KCCs).

1. NABARD supplements the resources of Rural Financial Institutions through refinance for Short Term – Seasonal Agricultural Operations and for asset creation & capital formation in rural areas through Long Term refinance with an additional line of credit for Cooperative Banks to diversify lending through Short Term Multi-purpose During 2022-23, NABARD provided short term refinance of Rs. 6,484.27 crore to MStCB, and of Rs. 500 crore to RRBs. Further, the long term refinance of Rs. 12,871.50 crore was extended to commercial banks, RRBs, State Cooperative Banks and NBFCs during 2022-23.

2. Maharashtra is one of the most vulnerable states in terms of impact of climate change on agriculture and rural As per the State Action Plan for Climate Change (SAPCC) and various studies related to climate change, agriculture in Maharashtra is highly vulnerable to climate change impact due to predominance of rainfed farming and small and marginal land holdings. It has been indicated that, increasing temperature and humidity in 2030s, 2050s and 2070s will have adverse impact on crop productivity. Specifically, horticultural crops such as pomegranate, grapes, oranges, and mango will be impacted from increased pest infestation due to increasing temperature. Untimely and extreme rainfall will have direct impact on crop production. Based on the vulnerability index developed as part of the SAPCC, Nandurbar district ranks first in terms of vulnerability to climate change. It is followed by districts of Dhule, Buldhana, Jalgaon, Hingoli, Nashik, Jalna, Gondia, Washim, and Gadchiroli.

So, the trend in agri and priority sector credit disbursement in Maharashtra, depriving the rural Maharashtra to a significant extent, is in tune with the national trend. One may agree that this is not an exercise indulging in mere dilettantism; rather, it is corroborated by official data based on NABARD State Focus Paper, Maharashtra, 2024-25, SLBC, RBI, Govt of Maharashtra data.

(The author is General Secretary, All India Nabard Employees Association –AINBEA; A Brief Note on Agri-Credit in Maharashtra (2022-23))