RBI has said lending to the agri-segment should constitute 18% of the total loan book of a bank, but most PSBs are short of their targets. RBI has set targets for direct and indirect agriculture credit components at 13.5% and 4.5%, respectively. Direct finance includes short, medium and long-term loans given for agriculture and allied activities directly to individual farmers, self-help groups or joint liability groups of individual farmers. Indirect finance includes lending to corporates, partnership firms and institutions for taking up agriculture or allied activities.
By September end, SBIs disbursement was 12% of its total advances. The corresponding number for Bank of Baroda stood at 15.43% and 9.86% for Union Bank of India. Allahabad Bank and Central Bank of Indias total agri-loan book size was 11% and 12%, respectively, of their total advances by the end of September.
Among all PSBs, only Punjab National Bank and Andhra Bank with 17.87% and 17.02%, respectively, are on track to achieve RBIs target by the end of the FY2013.
In last 3-4 years, demand for corporate credit has been very high and that probably has brought down the percentage of agri-loan book in PSBs, said Rajan Dhawan, executive director of Bank of Baroda.
SBIs top executives have said meeting the agriculture loan target would be challenging and may take 2-3 years, even as they look for new ways on increasing its direct exposure to farmers and also look at alternative lending models. The Union finance minister P Chidambaram during a meeting with public sector lenders last week urged bank executives to give a greater thrust towards meeting their priority lending targets including agricultural loan target of 18%.
The finance minister did mention shortfalls in the agri-lending target a cause of concern and banks have a roadmap for meeting these targets but it will not happen in one year. Union Bank will take 2-3 years before it meets the 18% target, said SS Mundra, the executive director of Union Bank.
As per RBI guidelines, banks must invest the shortfall in the agri-lending targets to Rural Infrastructure Development Fund (RIDF) established with Nabard. RIDFs rate of return is very low. Banks would rather look for ways to meet their agri target then take this route. This is not a viable route, said Ram S Sangapure, GM retail of Central Bank of India.
Apart from lending more aggressively to farmers, bankers say they are looking to meet to meet their agri-loan targets through schemes like the Kisan Credit Card scheme and have sanctioned loans to the tune of R5.2 lakh crore since the inception of the scheme in 1998-99. Other options to boost lending to agriculture include lending to Farmers Service Societies (FSS) and Large-sized Adivasi Multi Purpose Societies (LAMPS).