Issues & Constraints for institutional credit flow

Despite having opportunities and potential, fisheries sector has not been getting the due share of institutional credit. There are several factors responsible for this. Some of the major factors are discussed below.

Area based approach

Large resources remain untapped for fisheries development, which can be developed through institutional credit by formulating region or area-specific plans. Bankers shy away from financing investment projects due to lack of appraisal skills and also lack of linkage support.  In order to address this issue, NABARD has been propagating the idea of Area Development Plans (ADPs). These plans are prepared for financing large number of smaller projects on a cluster mode where in all the backward and forward linkages will be identified and linked to suitable agencies and units will be allocated to banks. The techno- financial appraisal will be done for a sample unit. This will obviate the need for individual project formulation and appraisal of each of the project by the banker, saving time. The concept has been implemented successfully in many sectors.

Technology adoption

One reason for poor interest for banks in fisheries investments is the low level of technology adoption by farmers leading to low production and productivity raising concerns about the income and viability. There is a need to transfer commercially viable technologies to farmers and incentivize their adoption to make projects viable.


Many of the activities fail due t lack of infrastructure support for transport, storage, processing, marketing etc., which needs to be addressed. Being highly perishable commodity, timely storage and marketing are crucial in case of fish. Funds available from RIDF and NABARD and other Central/ State schemes may be tapped for the purpose.

Capacity building/ Skill training

Lack of skill or capacity is another weak area resulting in low production and productivity. NABARD has been supporting entrepreneurship and skill development training programmes linked to bank finance under the schemes like Rural Entrepreneurship Development Programmes (REDPs), Micro Enterprise Development Programmes (MEDPs), and Livelihood Enterprise Development Programmes (LEDPs) etc., which have resulted in higher success rate of enterprises and enhanced confidence of banks.

Credit linked Subsidy

A number of central and State agencies are involved in supporting fisheries through subsidy to farmers and entrepreneurs, many of which are not credit linked. Past experience shows that making the schemes credit linked would improve utilization due to involvement of banks. By inducting credit the same total allocation, more number of persons can be assisted under a particular scheme. NABARD has successfully implemented several such Central schemes for sectors like animal husbandry, horticulture, agri marketing etc.


Another critical factor affecting credit for fisheries is lack of suitable insurance coverage. Fisheries have been perceived as a high-risk investment by banks and hence, they do not finance without insurance coverage. The insurance schemes in vogue are not farmer-friendly with high premium and cumbersome procedural formalities. As in case of crop insurance, simple and cost effective insurance products should be devised for fisheries in order to protect the interest of both the entrepreneur and the bank.

Interest incentives

Short term agricultural loan up to Rs.3 lakh is available at concessional rate of interest @ 7% p.a, with a further incentive of 3% on prompt repayment. This is possible due to interest subvention and interest incentive support from the Central Government. However, such concessional rate is not available for short term or long term loans under fisheries. Introdution of such interest concessions can boost credit off-take under fisheries.

Credit Guarantee

Banks insist on collateral security for loans beyond the free limit fixed by RBI. However, small farmers and entrepreneurs usually find it hard to provide adequate collateral security, there by not able to avail bank credit. Setting up of a Credit Guarantee Fund with Government support can facilitate collateral-free loans to needy farmers.

Proactive banks

Banks need to be proactive in supporting commercially viable investments under fisheries. Many a time banks give lukewarm response citing reasons of past defaults, painting a bad impression about the entire sector without any specific analysis.


Fisheries sector is important for the country’s food security as also socio-economic development. There is huge opportunity for investments in fisheries to increase the fish production and enhance the income for the farmers. Central Government has come out with a comprehensive plan for ‘Blue Revolution’ aiming to increase production and to double farmers’ income over the next 5 years. The Governmental efforts need to be supplemented through credit from institutional sources. However, credit has not been flowing to the sector due to various constraints. There is a need to address those issues so as to smoothen the credit flow and hasten the development process.


Source: Aqua Aquaria

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