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RBI mulling over lowering cap on agri sector credit in Punjab

Top central bank executives say they are conducting investigations into the matter to come up with a new policy.

punjab Updated: Jun 18, 2018 20:53 IST
Gurpreet Singh Nibber
Gurpreet Singh Nibber
Hindustan Times, Chandigarh
Reserve Bank of India,Punjab,Punjab farmers
Farmers’ outstanding loans towards public and private sector banks had touched Rs 63,729 crore as on March 31, 2018, according to Punjab State cooperative Bank figures. (HT File)

The policy of treating agriculture as a priority sector when it comes to extending credit by banks is hurting the interests of Punjab farmers since it is adding to rural debt, the Reserve Bank of India (RBI) has said.

Senior central bank executives, who were in the city last week for a media workshop, said they are investigating the matter and may come up with a new policy to lower the cap on lending to the farm sector.

Of the total advances, it’s mandatory for the banks to extend 18% credit to the agricultural sector.

“The regional office (in Chandigarh) has sent us a report and we will take action after studying the matter further,” said an executive director-rank officer of the RBI, who requested not to be named.

“Every banker (of public sector and private banks) should do a proper assessment about the repaying capacity of the farmers. They are giving loans for reasons other than the crop showing it as part of their priority,” said Vishavjeet Khanna, Punjab additional chief secretary (development).

“How can be loan accounts with various banks be more than the number of farmers (in state)? The issue needs to be looked into,” he said.

“We plan to move a case for putting cap on credit or devise a formula to deal with the situation,” said another chief general manager-rank official.

Balbir Singh Rajewal, president of a faction of the Bharatiya Kisan Union (BKU), the nationalised and private banks in the garb of priority lending, impose loans on the hapless farmers.

“At the time of advancing loans to farmers they take blank post-dated cheques which they misuse at the time of recovery, flouting the RBI norms that mandate not accepting blank cheques from farmers,” said Rajewal.

“At the time of recovery, the banks put the amount in the recoverable account and send the cheques for clearance and when they bounce due to lack of funds, they start criminal proceedings against farmers (in cheque bounce cases),” he said.

He said the banks also charge exorbitantly from the farmers in the name of account keeping fee, processing charges and legal charges. “They (banks) are worse than the commission agents,” he said.

Punjab chief minister Capt Amarinder Singh has also raised issue with the Centre, saying the banks are fleecing farmers. “We have sent a communication to the Centre. When the T Haque committee was working on the Punjab government’s debt waiver policy, this issue came up,” said additional chief secretary (cooperation) DP Reddy.

Figures available with the Punjab State Cooperative Bank reveal that as on March 31, 2018, farmers’ outstanding loans towards the nationalised and commercial banks have touched Rs 63,729 crore.

A cooperative bank official said as per the recommendation of a technical committee a farmer should be given loan of Rs 24,000 for wheat and Rs 23,000 for paddy crop for an acre per season.

“If totaled, the advances should not be more than Rs 40,000 crore but the outstanding amount is much more. It shows the loans have been forced on the farmers without checking their credit history,” said a senior manager with a state cooperative bank, adding that farmers are in a stress and they try to raise money from whichever source available to them.

As per figures from the state-level banking committee, the total outstanding loan from farmers is Rs 80,000 crore. The state government has launched a scheme to waive up to Rs 2 lakh debt of small and marginal farmers.

First Published: Jun 18, 2018 09:16 IST