With expectations of an above normal monsoon this year, the government wants public sector banks to push the envelope beyond just meeting lending targets for the agriculture sector.
Agriculture is a priority sector and Indian banks are mandated to disburse 18% of their total advances to the sector.
While banks have managed to meet the targets every year, several regions have not received adequate loans. “There have been certain issues on the distribution of loans…there have been complaints from certain quarters that loans were not given to them (farmers)..this has been raised,” said a finance ministry official.
Districts in Jammu and Kashmir, northeastern, eastern and central India have been overlooked by the banks. “To address this banks have been given region-wise targets in 2016-17,” said the official.
As of April 29, 2016 banks in India had disbursed over Rs 9 lakh crore worth of loans to agriculture and allied sectors, an annual growth of 15%. About 40% of the total agricultural loans are given to Kharif crops. The Kharif season extends from April to October.
A good monsoon is expected to boost agriculture growth, which is a big component of India’s GDP, besides bringing down food prices.
But non-performing assets (NPAs) in the agriculture loan segment have increased in the last couple of years with small and marginal farmers being a cause of concern. Moreover, since 8% of the total credit has to be given to this section. This can affect loan disbursement.
“After two droughts and an increase in the agri-loan target, it is critical for banks to ensure timely repayment,” said Soumya Kanti Ghosh, chief economist, State Bank of India.