With good monsoon on cards, govt tells banks to raise agri loans

With expectations of an above normal monsoon this year-- after two consecutive years of drought, the government has a message for the public sector banks. Merely meeting the agriculture loan targets every year is not enough, the distribution has to be even and appropriate.

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.

With the promise of good monsoon this year, the government has told public banks to ensure even distribution of agri-loans across the country. (AP)

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.

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.