Axis Bank undershoots farm lending, to refocus

India’s third largest private lender, Axis Bank, aims to lend more to farmers in 2011-12, to improve its share of agriculture loans in net advances. The move will help the bank meet its priority sector commitments in farm credit, where it has fallen short of the target till now.

The share of farm loans is currently 15 per cent of Axis’ net advances, below the Reserve Bank of India (RBI) mandate of 18 per cent.

“On an overall basis, we have met our priority sector targets. In agriculture, it is slightly below the target. We have revamped our agriculture business. We expect to catch up with the benchmark 18 per cent,” S K Mitra, president, agri and rural banking for Axis, told Business Standard.
 

HITS AND MISSES Targets achieved by banks under priority sector in 2009-10
	Overall (40% of  net bank credit)	Farm (18% of net bank credit)
Top 3 public banks
State Bank of India	Yes	Yes
Punjab National Bank	Yes	Yes
Bank of Baroda	Yes	No
Top 3 private banks
ICICI Bank	Yes	Yes
HDFC Bank	Yes	No
Axis Bank	Yes	No
Yes indicates fufilling priority sector targets; No indicates falling short of priorty sector targets;                                                         Source: Reserve Bank of India

The bank plans to hire more staff in its agriculture business unit and add branches in rural and semi-urban centres. “We currently have around 12 agri business centres. We plan to add a few more this year, beside opening new branches in tier III, IV and V towns,” Mitra said. “We are also looking to increase our headcount significantly and looking to hire graduates from agriculture universities, rural management institutes and even top business schools like the Indian Institutes of Management.”

The RBI report on ‘Trend and Progress of Banking in India for 2009-10 (April-March)’ showed a host of private and government banks had failed to lend 18 per cent of their net credit to the agriculture sector. While private lenders found it difficult to meet the priority sector targets because of relatively less number of branches in rural regions, even some public sector banks with more rural branches also failed on these commitments.

Mitra said besides offering loans to farmers directly, Axis is also exploring opportunities in contract farming, which includes agriculture lending through tri-partite agreements between banks, farmer and companies. “In contract farming, the loan recoveries are better. So, it helps in maintaining the asset quality. We looking to lend more through contract farming,” he said.