PSBs to raise farm credit by 30 per cent

Public sector banks have decided to oblige finance minister P. Chidambaram, on increasing farm credit growth. Banks have expressed confidence that a 30 per cent rise in agriculture credit as desired by the centre will not be a problem and that it will not affect their bottomline. Bank shares have already fallen on fears of a rise in non-performing assets due to the farm package.

After a meeting with bankers, Ranjana Kumar, chairperson, National Bank for Agriculture and Rural Development (NABARD), said, "Action plans prepared by lending institutions indicate that agriculture credit will be enhanced to about Rs1,05,000 crore in 2004-05, representing a 30 per cent increase over the flow of credit in the previous year.''

According to Kumar, each rural and semi-urban branch of commercial banks would take up two to three investment projects in plantation and horticulture, fisheries, organic farming, agro-processing, livestock, micro-irrigation, sprinkler irrigation, watershed management, village pond development, etc.

In every district, commercial banks would finance 10 agro-clinics during the current year and NABARD would finalise a programme for agro-clinics after discussions in state-level banking panels.

Bank chiefs and NABARD officials had a detailed discussion on the farm credit package in Mumbai. V. Leeladhar, chairman, Indian Banks' Association, said, "The growth in farm credit by the public sector banks is already in the range of 22 to 26 per cent and the 30 per cent growth target can be comfortably achieved. The recovery rate of agriculture credit (75 to 90 per cent) is better than the average recovery rate (54 to 55 per cent) of PSBs and also non-performing assets levels are not very high."

According to Leeladhar, "The total farm credit disbursement by commercial banks in 2003-04 was Rs43,000 crore and in the fiscal 2004-05 we have to disburse Rs57,000 crore to the sector.'' The share of regional rural banks would be hiked to Rs8,500 crore and co-operative banks to Rs39,000 crore. The finance minister has asked banks to lend up to Rs105,000 crore to the farm sector.