RBI proposals to restrict land financing by NBFCs

New Delhi, Jan 26 In a bid to strengthen Agri-NBFCs and help it become a significant contributor in financing the entire value chain of agriculture, the government may consider including these financial institutions in all state supported subsidy schemes and programmes.

The Agri sector NBFCs have made a strong case for including them in various subsidy schemes and programmes of the government, a benefit hitherto available only to the Banks.

This is a demand that would be given due consideration while framing financing regulations for the agricultural sector, official sources said.

"This (inclusion of Agri NBFCs in government programmes) will bring about certainty and predictability in the business of rural lending and make the system transparent in terms of policy implementation. Additionally, customer benefits will also significantly increase," said Prabhat Chaturvedi, CEO, Netafim Agricultural Financing Agency (NAFA).

The government statistics suggest that more than 85 per cent of the farmers are small & marginal with less than 2 hectare of land and have less than 30 per cent access to formal credit.

To ease the access of credit and support the government's ambition of financial inclusion, Agri-NBFCs have played an important role by offering access to financing at attractive and competitive commercial terms for farming equipment and machinery. However, these NBFCs have traditionally been excluded from the purview of government subsidy schemes.