Banks short on loans to poor, farm sector

ECONOMIC SURVEY 2003-04/ FINANCIAL SECTOR

Banks have fallen short of meeting their sub-targets for lending to the agriculture and weaker sections of society.

This comes even as the declining share of the small scale sector in the outstanding priority sector advances has become a cause for concern, the Economic Survey 2003-04 said.

For public sector banks, advances to agriculture constituted 15.9 per cent of net bank credit (NBC), falling short of the sub-target of 18 per cent. Their outstanding advances to weaker sections constituted 7.2 per cent of the NBC at the end of September 2003, falling short of the sub-target by 2.8 percentage points.

At the end of March 2003, outstanding advances to agriculture and weaker sections by private sector banks constituted 10.8 per cent and 1.5 per cent of NBC, respectively.

The sub-targets for foreign banks operating in the country are 10 per cent of NBC for the SSI sector and 12 per cent of NBC for export credit.

Outstanding advances towards export credit by foreign banks constituted 18.7 per cent of their NBC at the end of March 2003, exceeding the target by 6.7 percentage points.

There was a shortfall in meeting the target set for SSI lending by these banks by 1.3 percentage points. Export credit does not form part of priority sector lending for domestic banks.

The target fixed for priority sector lending "" agriculture, SSI, other priority sector "" by domestic banks and foreign banks is 40 per cent and 32 per cent, respectively.

At the end of March 2003, priority sector lending by PSBs amounted to 42.5 per cent of their NBC. Outstanding priority sector advances by private sector banks and foreign banks constituted 44.4 per cent and 33.9 per cent respectively of their NBC.

On lending to the SSIs, the survey said : "the declining share of the SSI sector in the outstanding priority sector advances of public and private sector banks since 1999-2000 is a cause for concern."

The share of SSI advances in the net bank credit declined from 16.1 per cent at the end of March 1999 to 11.1 per cent at the end of March 2003 in respect of PSBs.

For the private sector banks, the share declined from 18.8 per cent to 8.3 per cent in the same period. There is no sub-target for advances to the SSI sector by domestic banks.