Public sector banks asked to step up lending to agriculture

Anticipating a dip in credit delivery by cooperative credit institutions, the Centre has asked public sector banks to lend about 10 per cent more than their target. Commercial banks, including the government-owned lenders, were earlier expected to lend around Rs 1,95,000 crore to the farm sector during the current financial year.

Government data for April-December 2008, shows that scheduled commercial banks will comfortbaly achieve their target while regional rural banks, which are sponsored by the state-run banks, may also just manage to achieve their target. However, cooperatives are falling short of their target. These institutions have been wary of lending as more farmers are defaulting on loan repayment in expectation of a fresh loan waiver and settlement scheme.

Commercial banks have achieved over 63 per cent of their target in the first nine months of the fiscal 2008-09, slightly higher than 61.92 per cent of the target achieved in the same period of the previous fiscal (chart). Regional Rural Banks (RRBs) have achieved 59 per cent of their target of Rs 30,000 crore, lower than 73.66 per cent achieved in April-December of 2007-08. The RRBs have assured that they will make all out efforts to achive the target.

Cooperative institutions were the worst performers. They have achieved only 52 per cent of their annual target of Rs 55,000 crore, as compared to 82 per cent of the target achived in the first nine months of the previous year.

Worried over the performance of the cooperatives, the government has asked the public sector banks to lend about 10 per cent more of their target to ensure the overall target of Rs 2,80,000 crore farm credit for 2008-09 is achieved. In April-December 2008, 60.66 per cent of the target was achieved, which is lower than 66.79 per cent of the target achieved during the period in the previous fiscal.

“Public sector banks have been asked to lend about 10 per cent more, so that if the cooperatives do not meet the target, the overall credit target does not suffer,” said a bank chief. A government official confirmed this. The issue was discussed in the meeting of state-run bank chiefs with finance minister Pranab Mukherjee on February 2.

On January 16, Finance Secretary Arun Ramanathan held a meeting with the Secretaries Cooperation or Finance of the State Governments, to review the progress of agriculture credit flow by all cooperative banks and RRBs.

National Bank for Agriculture and Rural Development (NABARD), a refinancing institution, is also undertaking monthly review of Ground Level Credit.

(GLC) for agriculture regularly and has written letters to state governments where cooperatives are lagging behind in credit flow compared to previous fiscal. NABARD has also requested chiefs of all commercial banks to further enhance credit to agriculture.