FM raps banks on farm lending
Finance minister Pranab Mukherjee has pulled up chairmen of government-owned banks in a recent meeting for not meeting targets for agriculture lending. Mahua Venkatesh reports.business Updated: Aug 01, 2011 21:38 IST
Finance minister Pranab Mukherjee has pulled up chairmen of government-owned banks in a recent meeting for not meeting targets for agriculture lending. As per the Reserve Bank of India (RBI) guidelines on lending to the priority sector, banks are required to achieve a target of 18% of the total credit towards agriculture.
Several large and mid-sized banks have failed to meet their targets. The finance ministry has also asked banks to show specific reasons for not being able to achieve the set targets.
Bank chairmen have now been directed by the government to frame a mechanism to ensure that the set targets are met.
At present, the banking system covers about 50% of the farmers in the country. The rest are still primarily being catered for by money-lenders, with cash strapped micro financial institutions have significantly reduced lending to the farmers.
"The finance minister has raised concerns over the issue of agriculture lending and we will get back with suggestions on how to address the problem" a public sector bank chairman told HT.
However, it was a one time scheme and banks were expected to shore farm loan portfolio and bring as many farmers as possible under the formal banking net. The growth in the number of farmers'account has been a mere 14% in the last one year.
Mukherjee has also asked banks to devise a strategy to increase the number of farmers' bank accounts. The move would give a push to the much hyped financial inclusion programme of the UPA government.