3G pressure on farm lending

With the monsoons expected to hit north India shortly, banks may come under pressure to make available sufficient funds for farmers in the kharif crop sowing season. Mahua Venkatesh reports.

With the monsoons expected to hit north India shortly, banks may come under pressure to make available sufficient funds for farmers in the kharif crop sowing season.

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The kharif crop accounts for two-thirds of the country's total annual food grain production, and about 60 per cent of the bank credit to farmers is availed during this period.

This year the government has set a bank credit target of Rs 3,75,000 crore. This would mean that about Rs 225,000 crore are available within the banking system for lending to farmers in the next few weeks.

"Maintaining adequate liquidity should be seen in the light of sucking out of funds due to the 3G auction," said Amit Mitra, secretary general of Federation of Indian Chambers of Commerce and Industry (Ficci).

The telecom spectrum auction has netted the government about Rs 1.06 lakh crore - more than thrice what the government had budgeted for.

But this has also given rise to fears of a cash crunch as mobile carriers scrambled to secure bank loans to meet the tight deadlines to pay the government.

The RBI moved in to calm fears of an emerging liquidity crisis, raising the limit on bank borrowing under its repo facility by 0.5 per cent of banks' deposits to meet liquidity requirements.

Banks said the telecom scenario would not compromise the lending to farmers.

"We will ensure that there is no liquidity crunch for lending to sectors such as agriculture as it is a national priority," a public sector bank chairman requesting anonymity.