Resources Research

Culture and systems of knowledge, cultivation and food, population and consumption

Posts Tagged ‘credit

The big money in India’s cities

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Almost seven out of ten rupees banked in India are to be found in the top 100 centres. They account for 68.5% of the total bank deposits in India.

Almost seven out of ten rupees banked in India are to be found in the top 100 centres. They account for 68.5% of the total bank deposits in India.

The concentration of the country’s bank deposits in India’s urban centres can be seen in this detail from a table I have assembled using data from the Reserve Bank of India (RBI).

This is the quarterly series that the RBI puts out and is called ‘Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks’.

The intriguing table which forms the image is of the top 100 urban centres ranked by bank deposits, and arranged alphabetically, for the years 2007, 2009, 2011 and 2013. The city names and total deposits (in crore rupees) are seen. This is the lower end of the table, and I have coloured ten cities to show how their deposits have changed over six years.

The rate of growth has been extremely steep. We have here Panaji, Patiala, Pune, Ranchi, Shillong, Thane, Thiruvananthapuram, Udaipur, Varanasi and Visakhapatnam for no reason other than their entries for all four years are visible. The patterns for the rest of the top 100 centres is generally the same.

For these ten cities, the average growth rate of their total bank deposits over these six years is 190%! This is most significant to us, especially considering the food inflation, the cost of cultivation, wage rates of agricultural labour and allied issues I write about in this diary. Have the wage rates for agricultural labour grown over these last six years at even one-third this average rate? Not at all.

RG-bank_urban_deposits_detailFrom this small set of ten cities alone, the lowest rate of growth of total bank deposits is 88% (Vishakhapatnam in Andhra Pradesh) and the highest is 249% (Thane in Maharashtra).

The progression of the size of total deposits can be seen from Shillong (in Meghalaya) from Rs 2,577 crore in 2007 to Rs 8,311 crore in 2013 (which is dwarfed by the others). In Ranchi (Jharkhand) total bank deposits have grown from Rs 6,436 crore in 2007 to Rs 21,688 crore in 2013!

That is why the top 100 centres accounted for 68.5% of the total bank deposits in India – this is a ratio that has remained roughly the same for the last six years. In addition, as the ‘Quarterly Statistics’ has noted in its highlights, the top 100 centres also accounted for 76.9% of total bank credit.

And that is why it means little for central and state governments, and for businesses and NGOs and social entrepreneurships to talk about ‘financial inclusion’ when we have proof – quarter after quarter – of the persistence of financial inequality between India and Bharat.

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Dear scientists and donors, what part of ‘agro-ecology’ don’t you understand?

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“Resource-conserving, low-external-input techniques have a proven potential to significantly improve yields,” Olivier De Schutter, the United Nations Special Rapporteur on the Right to Food, has told the UN Human Rights Council at its Sixteenth session.

“In what may be the most systematic study of the potential of such techniques to date, Jules Pretty et al. compared the impacts of 286 recent sustainable agriculture projects in 57 poor countries covering 37 million hectares (3 per cent of the cultivated area in developing countries). They found that such interventions increased productivity on 12.6 millions farms, with an average crop increase of 79 per cent, while improving the supply of critical environmental services.”

“Disaggregated data from this research showed that average food production per household rose by 1.7 tonnes per year (up by 73 per cent) for 4.42 million small farmers growing cereals and roots on 3.6 million hectares, and that increase in food production was 17 tonnes per year (up 150 per cent) for 146,000 farmers on 542,000 hectares cultivating roots (potato, sweet potato, cassava). After UNCTAD and UNEP reanalyzed the database to produce a summary of the impacts in Africa, it was found that the average crop yield increase was even higher for these projects than the global average of 79 per cent at 116 per cent increase for all African projects and 128 per cent increase for projects in East Africa.”

Olivier De Schutter, United Nations Special Rapporteur on the Right to Food

Olivier De Schutter, United Nations Special Rapporteur on the Right to Food

The most recent large-scale study points to the same conclusions, De Schutter has said. Research commissioned by the Foresight Global Food and Farming Futures project of the UK Government reviewed 40 projects in 20 African countries where sustainable intensification was developed during the 2000s. The projects included crop improvements (particularly improvements through participatory plant breeding on hitherto neglected orphan crops), integrated pest management, soil conservation and agro-forestry. By early 2010, these projects had documented benefits for 10.39 million farmers and their families and improvements on approximately 12.75 million hectares. Crop yields more than doubled on average (increasing 2.13-fold) over a period of 3-10 years, resulting in an increase in aggregate food production of 5.79 million tonnes per year, equivalent to 557 kg per farming household.

The Special Rapporteur’s recommendations:
As part of their obligation to devote the maximum of their available resources to the progressive realization of the right to food, States should implement public policies supporting the adoption of agroecological practices by:
• making reference to agroecology and sustainable agriculture in national strategies for the realisation of the right to food and by including measures adopted in the agricultural sector in national adaptation plans of action (NAPAs) and in the list of nationally appropriate mitigation actions (NAMAs) adopted by countries in their efforts to mitigate climate change;
• reorienting public spending in agriculture by prioritizing the provision of public goods, such as extension services, rural infrastructures and agricultural research, and by building on the complementary strengths of seeds-and-breeds and agroecological methods, allocating resources to both, and exploring the synergies, such as linking fertilizer subsidies directly to agroecological investments on the farm (“subsidy to sustainability”);
• supporting decentralized participatory research and the dissemination of knowledge about the best sustainable agricultural practices by relying on existing farmers’ organisations and networks, and including schemes designed specifically for women;
• improving the ability of producers practicing sustainable agriculture to access markets, using instruments such as public procurement, credit, farmers’ markets, and creating a supportive trade and macroeconomic framework.

The research community, including centres of the Consultative Group on International Agricultural Research and the Global Forum on Agricultural Research, should:
• increase the budget for agroecological research at the field level (design of sustainable and resilient agroecological systems), farm and community levels (impacts of various practices on incomes and livelihoods), and national and sub-national levels (impact on socio-economic development, participatory scaling-up strategies, and impacts of public policies), and develop research with the intended beneficiaries according to the principles of participation and coconstruction;
• train scientists in the design of agroecological approaches, participatory research methods, and processes of co-inquiry with farmers, and ensure that their organizational culture is supportive of agroecological innovations and participatory research;
• assess projects on the basis of a comprehensive set of performance criteria (impacts on incomes, resource efficiency, impacts on hunger and malnutrition, empowerment of beneficiaries, etc.) with indicators appropriately disaggregated by population to allow monitoring improvements in the status of vulnerable populations, taking into account the requirements of the right to food, in addition to classical agronomical measures.

India’s Reserve Bank puts the ‘micro’ back into microfinance

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Protesters participate in Khammam, Andhra Pradesh, against microfinance. The MFIs have not been successful in staying the operation of the ordinance but the A.P. High Court has allowed them to continue with their business after registering themselves. Photo: The Hindu/G.N. Rao

Protesters participate in Khammam, Andhra Pradesh, against microfinance. The MFIs have not been successful in staying the operation of the ordinance but the A.P. High Court has allowed them to continue with their business after registering themselves. Photo: The Hindu/G.N. Rao

From 2010 September, the microfinance sector in India and South Asia has been questioning the basis of ‘growth’ in the sector and suggesting (at times strenuously) that the fundamentals be re-examined. India-based social business advisory firms such as Intellecap had analysed the build-up to the microfinance crisis in Andhra Pradesh, India. Microfinance companies have had to balance their commercial interests with the social and moral expectations of a wide variety of stakeholders.

Muted before the crisis, the allegations became loud and threatening during – of coercive practices, lack of transparency, and usurious interest rates which had led to suicides by borrowers in Andhra Pradesh. The sector had advised against knee-jerk ordinances in response to the crisis as being more damaging to borrowers than punitive to irresponsible or criminal lenders. The solutions they sought are stronger ethical practices, reporting and compliance rules and transparency.

The new Reserve Bank of India measures – now heavily reported and commented on – are the first step towards those solutions. India’s Reserve Bank has released a report to study the issues and concerns in the microfinance sector, which has gone through a major crisis in 2010. The Report of the RBI Sub-Committee of its Central Board of Directors to study issues and concerns in the micro finance institutions (MFI) Sector is summarised here [pdf].

Victims of MFIs display their daily payment cards in Visakhapatnam, Andhra Pradesh. The Reserve Bank of India has appointed a sub-committee to look at governance issues. Photo: The Hindu/C.V. Subrahmanyam

Victims of MFIs display their daily payment cards in Visakhapatnam, Andhra Pradesh. The Reserve Bank of India has appointed a sub-committee to look at governance issues. Photo: The Hindu/C.V. Subrahmanyam

The RBI said: “Credit Support to Micro Finance Institutions (MFIs). The Reserve Bank of India had held discussions with select banks on December 22, 2010 to get an assessment regarding the ground level situation in the microfinance sector in Andhra Pradesh and other States and the need for any interim measures. The banks informed that collections by MFIs in Andhra Pradesh had deteriorated considerably and there were some incipient signs of contagion spreading to other States. Subsequently, IBA based on the feedback received by them from banks had come up with a proposal that there is a need for extending certain relaxations in the restructuring guidelines of RBI for the MFI sector.” The Sub-Committee statement is here [pdf] and RBI’s credit statement is here [pdf].

The financial press has reported the RBI’s intervention extensively.

“S. Bhanu, 48, who runs a tiny textile business in Godavarikhani village in the Karimnagar district of Andhra Pradesh, doesn’t know much about the crisis that has gripped India’s `20,000 crore micro-lending industry,” reported The Mint. “But Bhanu can tell you about how much more she owes the local moneylender in the past two months.”

“India’s central bank Wednesday allowed a special relaxation to banks in restructuring loans to microlenders, a move that will give lenders temporary flexibility in providing credit support to the cash-strapped institutions,” reported the Wall Street Journal.

The Reserve Bank of India (RBI) has asked banks to go easy on microfinance institutions (MFIs) by relaxing certain norms regarding loan restructuring. Banks can now restructure loans extended to MFIs even if they are not fully secured, Business Standard reported.

The Economic Times reported that under the new rules, restructured loans to the microfinance sector, can be classified by banks as standard assets, even though such loans are typically unsecured. The temporary relaxation of asset classification rules for bank loans to the microfinance sector is a move that it said will allow them to continue lending to the industry.

The Hindu reported that to revive the crisis- ridden micro finance sector, a Reserve Bank of India Committee on Wednesday suggested that micro finance institutions (MFIs) be allowed to charge a maximum interest of 24 per cent on small loans which cannot exceed Rs.25,000.

Members of All India Democratic Womens' Association protest against MFIs in front of the Reserve Bank of India office in Hyderabad, Andhra Pradesh. Photo: The Hindu/G.Krishnaswamy

Members of All India Democratic Womens' Association protest against MFIs in front of the Reserve Bank of India office in Hyderabad, Andhra Pradesh. Photo: The Hindu/G.Krishnaswamy

A year ago, in his study ‘Microfinance India: State of the Sector Report 2009′ (published by Sage Publications India, 2009), N Srinivasan of Access Development Services, wrote: “Micro finance sector seems to grow and with no full stop in sight. The sector performed creditably in a year that experienced a widespread liquidity crunch. The Self Help Group (SHG)–bank linkage programme made remarkable progress during the year; provisional data2 indicates that credit to more than 1.716 million SHGs would have been made available during the year. The outstanding SHG loan accounts were 4.14 million representing an estimated membership of 54 million.”

“The MFIs too have recorded an impressive increase of about 8.5 million clients during the year registering a growth of 60 per cent over the previous year. The data collected from 230 MFIs by Sa-Dhan reveals that despite liquidity constraints faced by some MFIs, expansion in client outreach and loan portfolio was vigorous. The MFIs reported a total client base of 22.6 million as at the end of March 2009. The overall coverage of the sector as narrowly defined (outstanding accounts of members of SHGs and clients of MFIs) is estimated to have reached 76.6 million against 59 million last year.”

There’s more on the RBI statements and longer extracts from the reportage here.