Bank and financial institutions (BFIs) have so far floated subsidized loans worth Rs 920.36 million at six percent interest rate to farmers.
The government had announced subsidized farm loan through the budget for Fiscal Year 2014/15. While BFIs attribute low loan flow to lack of demand for such loans, others blame BFIs unwillingness to extend such rate loans to farmers.
NRB Spokesperson Trilochan Pangeni said that the credit amount was too low for the country with majority of population relying on agriculture. "The loan amount should have gone far above the amount as many people are relying on farming. It is very unfortunate that the loans have not gone much as per our expectation," he added.
To nudge the BFIs, Ministry of Finance and Nepal Rastra Bank (NRB) for bringing farmers into the scheme, parliamentary Agriculture and Water Resources Committee has already held rounds of meeting by summoning officials of the BFIs, government and NRB.
Gagan Thapa, chairman of the committee, sees reluctance BFIs to extend loans to farmers as a major obstacle behind failure of the growth of such subsidized credit. "We have been discussing about the pathetic condition of the scheme in the parliament panel meetings. Our committee members, who are in the districts, are also studying the reasons on why such scheme has failed to attract farmers," Thapa said. "However, based on many complaints that farmers have shared with us, it is frustrating to note that BFIs are largely reluctant or unwilling to facilitate the process of extending such loans."
However, bankers do not accept such accusation. They see different reason for the scheme not getting much attraction from farmers.
"We have been extending loans to farmers who have a commercial as well as viable agro or farming project proposal," Upendra Poudyal, president of Nepal Bankers Association (NBA), said. "How can BFIs, who are sitting on excess liquidity (loan-able fund), become reluctant to finance projects that bring them around 10 percent of interest rates."
Many observers say lending of nearly Rs 1 billion should not be termed as meager.
"Though the scheme was introduced in 2014/15, its working procedure came only after six months. Again, the procedure went into the cabinet process for the amendment which took few more months for implementation of the scheme," said another banker, requesting anonymity. "The lending could have been more. Yet, the total amount that BFIs have floated in this short span of time amid slowdown in overall credit growth in the banking industry is not a meager."
The banker also took exception over the parliamentary panel's perception toward the scheme. "There is a perception that subsidized loans should be available to all whoever appear at the doorsteps of the banks. However, there is due process, conditions and limitation that a bank is bound to follow. While the central bank and the banks have understood this, the parliamentary panel has not," he added.
There are also calls to run publicity campaign to attract more farmers. "We are lacking in the publicity front. Similarly, the process to apply is also needs to be eased. The government and banks should work in this direction," Poudyal said. "Similarly, the areas in farming should be expanded further to boost such lending."
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