Report: Cash loans from non-institutional agencies drop | India News

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NEW DELHI: The hold of pawnbrokers in rural areas of the country may be weakening.
A recent survey showed that the share of cash debt of non-institutional credit agencies declined sharply to 34% in 2018 from 44% in 2012 and almost all states showed this trend, indicating the increase in the formalization of the economy.
An analysis of the All India Debt & Investment Survey (AIDIS) recently released by SBI research showed that the share of non-institutional credit has declined significantly in Bihar, West Bengal, Rajasthan, Haryana and Gujarat.
He said that even in Haryana and Rajasthan which experienced loan forgiveness schemes, the share of non-institutional credit has declined contrary to popular perception. “This could be explained by a significant increase in the penetration of Kisan Credit Cards (KCC) in these two states. Our estimates show that the number of KCC cards jumped five times in the seven-year period ending in 2020. For the record, Haryana and Rajasthan saw an average increase of 9%,” Soumya Kanti Ghosh, the group’s chief economic advisor at SBI, said in his report.
He said recent agricultural reforms could further contribute to the formalization of the economy. “However, there is still a fundamental reform pending in the area of ​​RBI. This makes agricultural credit on par with other segments,” he said. According to the report, in accordance with the asset classification standards for agricultural advances, in the case of an agricultural cash credit account, a farmer must repay all of the outstanding amount (principal and interest) to apply for new loans from banks, unlike other segments of the cash lending business. where if the borrower has settled the interest payments, he/she would be eligible for improvement/renewal. It would be in the interest of the farmer, if the farmer gets a renewal/improvement, especially when the bank is happy with the farmer in terms of his land ownership/ability to pay etc., adds the report.
The AIDIS report for 2018 shows an increase in the average amount of debt for rural and urban households, with the average amount of debt increasing by 84% and 42% respectively for rural and urban households for the 6-year period ending in 2018. State Trend wise indicates that average rural household debt more than doubled in 18 states during the 6-year period ending in 2018, while 7 states experienced the same for urban households. Importantly, 5 states including Maharashtra, Rajasthan and Assam experienced a simultaneous doubling of average urban and rural household debt during this period, according to the SBI report.
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