Archive for July 25th, 2007

RBI reports on rural sector

July 25, 2007

RBI has 2 interesting reports on rural/agricultural isector. One is on moneylending and the other is on distressed farmers.

The first one is on the increasng role of moneylenders in rural credit and what should be done about it. Should we legalise moneylenders within the system or not? If yes, then how do we go about it. It has a very interesting table which looks at sources of loan in farmer households in different states.  It says:

The survey reveals that out of every Rs 1,000 outstanding of farmer households in the country, Rs 257 was sourced from moneylenders. The share of moneylenders in the indebtedness of farmer households in Bihar, Manipur, Punjab, Rajasthan, Tamil Nadu and Andhra Pradesh were well above the national average, with Andhra Pradesh at the top. The penetration of moneylenders is significant even in States that are regarded as being adequately banked (Andhra Pradesh and Tamil Nadu).

The Banks contribute the highest on all India level – Rs 356 per Rs 1000.

And the second one is all about distressed farmers . It defines distress:

A farmer will be considered as distressed if it meets any or both of the following criteria:

a) The farmer is indebted to the formal and informal sources of credit to the extent of more than the monetary value of the land and other productive assets owned by the family [negative net worth] and/or,

b) The interest liability on loans from formal and informal sources exceeds 50 per cent, of his gross family income [liquidity crisis leading to inability to meet even consumption requirements].

It looks at the story of distressed farmers in a comprehensive manner and suggests some useful (well-known though) measures to control distress in farmer community.  

Both the reports look at the problems of rural/agricultural sector with financial market perspective.  I have just quickly glanced through the reports. Look like very good reads. It should help RBI and others develop some perspectives on financial inclusion as well.

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Assorted Links

July 25, 2007

1. WSJ Blog pointsto Bernanke’s busy hours.

2. I didn’t know S& P also rates colleges’ finances. Thanks to WSJ Blog for the pointer.

3. Raghu Rajan may help India in its financial sector reforms.

4. Akash Prakash in BS cautions on India story. Not very convincing though.

5. BS informsthat FTSE (UK based index provider) and IDFC have developed an infrastructure index. It would have infra companies listed on BSE and NSE. Here is the factsheet of what it means and what are the companies.


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