Sonia asks banks to provide credit to farmers

Gandhi was speaking at the launch of Financial Inclusion campaign -- Swabhimaan -- of the government, that seeks to provide banking services to 73,000 villages with population of over 2,000 and open at least 5 crore new account by March 2012 under the campaign.

"One of the most important objectives of the campaign will be to enable small and marginal farmers to obtain credit at lower rates from banks and other financial institutions so that they could be insulated from exploitation by moneylenders," Gandhi said.

Speaking at the function, Finance Minister Pranab Mukherjee said banking services would be rolled out in 20,000 villages this fiscal, but warned the banks against selecting wrong entities as their business correspondents -- persons acting as intermediaries between rural people and banks.

"For the year 2010-11, we have set a target of roll out in 20,000 villages. I am confident that this target will be achieved," he said.

Business Correspondents (BCs) are the face of the banks and they should be conscious of reputational risks that could arise if the wrong kind of BCs, or those who are providing technology as backup, are selected.

With agriculture poised to grow at 5.4 per cent in the current fiscal compared to just 0.4 per cent a year ago, Mukherjee said this was possible partly due to phenomenal growth in bank credit to the sector.

"This is a big improvement and is partly due to the tremendous growth in bank credit to the agriculture sector which is expected to cross the target of Rs 3,75,000 crore set for the year," he added.

He, however, expressed concern that only about 38 per cent of bank branches are in rural areas, providing coverage to 40 per cent of the country`s population. Besides, 51.4 per cent of farmer households in the country are financially excluded from both formal and informal sources of credit.