Hasten pace of extending farm loans: Govt to PSBs

Unhappy with the tardy pace of extending loans to farmers, the Union government has asked public sector banks to prepare plans to increase the number of loans to farmers.

In 2009-10, public sector banks had financed 48.2 million farm loans, with an outstanding amount of Rs 384, 514 crore. The outstanding credit rose to Rs 4, 46,778 crore, according to finance ministry data.

So far, the number of farmer accounts has not grown as rapidly as the credit flow. Currently, the banking system covers about 50 per cent of the farmers.

Finance Minister Pranab Mukherjee had, last week, discussed the matter with chiefs of public sector banks (PSBs). A senior PSB executive who had attended the meeting said PSBs had been asked submit a plan to scale up coverage of farmers.

On hurdles in reaching out to a greater number of farmers, a senior Bank of India official said in the public sector, loans need proper documents. Since a large number of farmers do not have clear land records, they are unable to secure credit. In contrast, cooperative banks and societies are less stringent about paper work and hence, farmers prefer to take loans from them. He added PSB employees sought to avoid complications and hence, are vigilant about paperwork.

Another aspect which hampers performance is the limited staff strength at rural branches, due to which such branches miss their targets.

Banks have also been asked to prepare a blueprint on achieving the mandated flow of credit to the farm sector. Some banks have not achieved their targets in the past three years, and these would have to explain the reasons that led to their poor performance, as well as the steps they would take to improve the situation.

The target set for agriculture credit was Rs 375,000 crore for 2010-11, while loans that bank actually gave out stood at Rs 446,778 crore, which exceeded the target by Rs 71,778 crore. Loans to the farm sector at the end of 2008-09 stood at Rs 301,908 crore.