Credit Flow To Agri-Sector Quite Satisfactory : Rbi

The Reserve Bank of India (RBI) today said that despite the drought in several parts of the country, credit flow to the agriculture sector was reasonably satisfactory. This was mainly achieved after banks started rescheduling loans to ailing farmers at the directive of RBI.

"We have issued automatic instructions to banks to reschedule loans whenever there is a drought situation," RBI deputy governor Vepa Kamesam today said at a seminar on micro finance organised by Sa-Dhan. "We have also come up with a rescheduling package for tea and coffee also," he added.

Asked whether there might be relaxation in norms if borrowers failed to pay up in time, he said there would be no compromise if the principal and interest is not paid in time.

He also said that RBI has asked public sector banks to meet the 18 per cent credit limit to the agricultural sector but said there would be no relaxation if borrowers did not pay up loans in time. "There has been two review meetings. Banks which have not been able to reach the 18 per cent limit have been asked to do so," Kamesam said.

Currently, banks are required to extend 40 per cent of their advances to the priority sector and 18 per cent to farm sector. In case of shortfall in meeting the agricultural target, banks can invest in RIDF bonds of Nabard to meet the stipulated limit.

Food credit, which is a measure of credit flow to agriculture sector, was growing less than 23 per cent while non-food credit to industry was growing by about 25 per cent till so far this fiscal.

Total bank credit till August end was at about Rs 6,54,000 crore, which was 23.7 per cent higher than corresponding period last year. "Majority of public sector banks have large network in rural areas. Why can't they meet it?" Kamesam said, adding the banks should continue to work in that manner and wherever room exists, they should fill the gaps.