State Bank of India will find it challenging to meet the new priority sector lending (PSL) targets for agriculture in view of recent changes made to the PSL guidelines by the Reserve Bank of India (RBI).
Speaking to The Financial Express, SBI MD and Group executive A Krishna Kumar said the new RBI norms aim at channelising more lendings directly to farmers. Therefore, SBI will focus more on increasing its direct exposure to farmers and also look at alternative lending models, he added.
Under new RBI guidelines on PSL based on the Nair Committee recommendations, credit to food and agro processing industries has been shifted from agriculture to micro and small enterprises. Also credit to institutions have been treated as indirect agri-finance.
SBI officials at the Rural Business Unit say that the the bank lending to agriculture sector was marginally lower than RBI prescribed 18% of total advances in the previous financial year. Under the new guidelines it will be a greater challenge to meet the 18% target. The targets under direct and indirect agriculture are at 13.5% and 4.5% of total advances respectively.
An SBI official said, ?Within one year, it might be a little difficult to meet the revised PSL target for agriculture, but we should be able to meet them over the next 2-3 years because of our large branch network.?
The new priority sector lending (PSL) guidelines has nudged the country?s largest lender State Bank of India into looking at alternative lending models for agriculture.
The main change that is expected to be enforced soon is a resumption of lending to Primary Agricultural Credit Societies (PACS) after a gap of three decades, said a senior banker in the rural business unit. ?There will be a huge gap in agri lending as a result of ]the changes in PSL norms. PACS is one way we will use to fill int that gap,? he added.
PACS are cooperative credit societies or non-financial intermediaries that offer financial assistance to farmers in procuring agri inputs like fertilizers. Commercial banks had stopped lending to PACS in the 1980s owing to non-performing asset (NPA) worries. PACS currently borrow mostly from cooperative banks.
SBI officials say that the bank is preparing a report on PACS to examine the opportunities in lending to the segment. ?We will take a view in the coming days and could start lending by this calendar year if all the internal approvals are in place,? the official said. Bankers say that the government and RBI have been urging bankers to lend to non-financial intermediaries like PACS as this form of financing reaches out directly to farmers. Loans to PACS have been categorized as direct agri lending by RBI in its new PSL guidelines. According to SBI study, there are over 1 lakh PACS in the country.
Other options to boost lending to agriculture include lending to Farmers? Service Societies (FSS) and Large-sized Adivasi Multi Purpose Societies (LAMPS). The agri lending growth in 2012-13 for SBI will stand at 25%, say SBI officials. The bank?s agri loan portfolio in 2011-12 stood at Rs 1,17,000 crore. ?Our growth is on track because this is a subsistence kind of sector not affected by global issues. We have already achieved around 33% of our annual target by August,? an official said.
SBI officials said that the asset quality worries that cropped in the last quarter have now eased with better monsoons. ?The rainfall deficit has been made good. We will restructure stressed loans in areas where drought has been declared,” official added.
