The Reserve Bank of India (RBI) has set out an action plan to impact the agri-sector. Many of these are based on the Radhakrishna Committee created to address credit constraints faced by farmers. One of the main announcements was that loans granted to RRBs (regional rural banks) for on-lending to agriculture and allied activities will be classified as indirect finance to agriculture. This is expected to boost the RRBs. Even the Urban Cooperative Banks (UCBs) are set to get a boost after the current announcements.
The shortfall in lending to weaker sections would be taken into account for contribution to RIDF with effect from April, 2009. The Reserve Bank will disseminate details of various charges levied by banks. Asset classification norms for credit to infrastructure projects has been relaxed.
In addition, a working group will be constituted comprising representatives of the Reserve Bank, Central/State governments and the UCB sector to suggest measures, including the appropriate regulatory and supervisory framework, to facilitate emergence of umbrella organization for the UCB sector in the respective states. To dispense with the extant eligibility norms for opening on-site ATMs for well-managed and financially sound UCBs in the states that have signed MoUs with the Reserve Bank and registered under the Multi States Co-operative Societies Act, 2002. With a view to liberalising and rationalising the branch licensing norms for UCBs, approvals for branch expansion, including off-site ATMs to be considered, based on annual business plans, subject to maintenance of minimum CRAR of 10% on a continuing basis and other regulatory comfort.
The RBI has also proposed to ask each domestic commercial bank, including RRBs, to select one district for introduction, on a pilot basis, of a simplified cyclical credit product for farmers to enable them to continuously utilize a core component of 20% of the credit limit.