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Role of Commercial Banks in providing agricultural credit

Role of Commercial Banks in providing agricultural credit :

Commercial banks are guided by priority sector lending policy of providing credit to various deserving sectors/sections including agriculture and allied activities.
Commercial banks entered the field of agricultural credit in a major way following their nationalisation in 1969. Growth in commercial bank credit to
agriculture, which was lower than the growth in aggregate bank credit during the 1990s, picked up sharply in the first half of the 2005s and largely coincided with the growth in aggregate bank credit. There was a downturn in the growth in commercial bank credit to agriculture after 2005-06, when growth in aggregate bank credit also slowed down. Previously commercial banks (CBs) were confined only to urban areas serving mainly to trade, commerce and industry. Their role in rural credit was abysmally low i.e., 0.9 per cent in 1951-52 and 0.7 per cent in 1961-61. The insignificant participation of CBs in rural lending was explained by the risky nature of agriculture due to its heavy dependence on monsoon, unorganized nature and subsistence approach. In the year 1990-91 share of commercial banks increased up to 54 percent. At present, they are the largest source of institutional credit to agriculture.

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