Announcement of Credit Scheme will Help India's Farmers on February 27, 1986

FOR IMMEDIATE RELEASE W orld Bank p1NL111VARFU) 4 I3ir NTER, :,,. V,-Y 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.* Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 86/52 Contact: P.B. Sison February 27, 1986 L r r 477-3573 CREDIT SCHEME WILL HELP INDIA'S FARMERS Agricultural production in India is expected to receive a boost from a credit scheme that is to be supported by a World Bank loan of $375 million. About five million farmers are expected to benefit directly from the project. More than half of these have incomes of less than $89 a year. The value of the increased production when the project is fully developed is put at about $1.5 billion. The project is consistent with, and supports the government's objective of modernizing Indian agriculture. But modernization will require growing amounts of credit for producers. The World Bank loan will be used to extend credit, through a number of institutions, to small-scale farmers for a wide range of farming activi- ties. These include: irrigation works, land levelling and soil conservation, livestock, plantations and horticulture, forestry, fisheries, and farm mechanization. In earlier agricultural credit projects supported by the World Bank in India, the production objectives were largely achieved. But the dramatic growth in credit has stretched the institutional capabilities and there is now a clear need for a strengthening of the financial institutions through which credit is channelled. In this context a credit review - five separate but interrelated studies - will be carried out. The studies will thoroughly review the operation of the credit system and will recommend measures to strengthen the organizational structure of the National Bank for Agriculture and Rural Development (NABARD). The project will finance the extension of a pilot scheme, begun in 1984, for strengthening the agricultural credit systems in three districts to 17 new districts. The Government of India and NABARD are providing nearly $3.5 billion for the project. Participating banks ($957.7 million), farmers ($532 million), Kreditanstalt fur Wiederaufbau ($21.2 million), and the Dutch Government ($5.5 million) will also share the costs of the project. The World Bank loan is for 20 years, including five years of grace, with a variable interest rate, currently 8.5 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.75 percent on undisbursed balances. NOTE: Money figures are expressed in U.S. dollar equivalents