Banks asked to raise farm credit to 40% by March

Mumbai, Aug 30 | Updated: Aug 31 2006, 05:30am hrs
The Reserve Bank of India (RBI) in its annual report released on Wednesday, emphasized the need for banks to make efforts to increase their disbursements to small and marginal farmers to 40% of their direct advances under the Special Agricultural Credit Plans (SACPs) by March 2007.

Two public sector banks and 12 private sector banks fell short of the target of 40% as on March 2005. The share of agricultural advances, as a percentage of net bank credit, increased in respect of public sector banks but decreased in respect of private sector banks during 2004-05.

RBI also stated the need for considering a comprehensive public policy on risk management in agriculture, not only as a means of relief for distressed farmers but as an ingredient for more efficient commercialised agriculture.

RBI has also expressed concern with regard to the banking practices that tend to exclude rather than attract vast sections of population, in particular pensioners, self-employed and those employed in the unorganised sector. Against this background, the apex bank plans to implement policies to encourage banks, which provide extensive services while disincentivising those which are not responsive to the banking needs of the community, including the underprivileged.

The apex bank is reviewing all its existing guidelines on financing small scale sector, debt restructuring, and nursing of sick units with a view to rationalising, consolidating and liberalising them. A simplified debt restructuring and rehabilitation mechanism is being considered for the sector.