Govt monitoring farm credit given by banks: Nirmala Sitharaman

Finance Minister Nirmala Sitharaman on Saturday said the Centre is keeping an eye on farm credit released by banks in rural areas and added that she expected to meet the increased target of Rs 15 lakh crore for the next financial year.

The finance minister made the observations at a post-Budget meeting with RBI’s Central Board of Directors.

In the Budget 2020-21, the government has raised the farm loan disbursal target by 11 per cent to Rs 15 lakh crore for the next fiscal and allocated Rs 1.6 lakh crore to implement various plans in agriculture and related sectors as it chases the goal of doubling farmers income by 2022.

The government has also allocated Rs 75,000 crore for the PM-KISAN scheme for the next fiscal, which is same as the budget estimate for this fiscal but a little higher than the revised estimate of Rs 54,370 crore.

“The credit limit has been expanded. I am sure it is based on local ground level requirement...we expect the demand to grow and credit requirements to also meet up with it. I am actually closely monitoring banks and their extension of credit facility particularly to rural areas. So I think we’ll be able to meet that,” Sitharaman said after the meeting.

The farm credit target for the current financial year has been fixed at Rs 13.5 lakh crore.

Normally, farm loans attract an interest rate of 9 per cent. However, the government is providing 2 per cent interest subsidy to ensure that farmers get short-term farm loans of up to Rs 3 lakh at an effective rate of 7 per cent per annum.

In connection with the proposed mega consolidation of public sector banks, the finance minister said there was no discussion on the issue at the RBI board meeting.

Last year in August, the government had announced the merger of 10 public sector banks into four. United Bank of India and Oriental Bank of Commerce are to be merged with Punjab National Bank, making the proposed entity the second largest public sector bank (PSB) from April 1 this year.

It was also decided to merge Syndicate Bank with Canara Bank, and Allahabad Bank with Indian Bank. Similarly, Andhra Bank and Corporation Bank are to be consolidated with Union Bank of India.

In April 2019, the Bank of Baroda, in the first three-way merger exercise, amalgamated Vijaya Bank and Dena Bank with itself.