RBI panel for review of priority sector lending
By Our Banking Bureau | 28 May 2004
Mumbai: The RBI appointed advisory committee on flow of credit to agriculture is of the opinion that the fixation of targets for lending to the priority sector including agriculture needs a comprehensive review. Till such time however, the existing target of 18 per cent of net bank credit for lending to agriculture may continue.
The Committee has also noted the difficulties faced by banks in achieving the target of 18 per cent, particularly in the context of faster growth in the quantum of net bank credit, the demand side constraints and the cap on indirect finance to agriculture for reckoning the performance of banks against the stipulated target.
There have also been suggestions to link the target to disbursements rather than outstanding advances. According to the Committee, all public sector and private sector banks should increase their direct lending to agriculture to a level of 12 per cent of net bank credit within two years and to the level of 13.5 per cent within the next two years thereafter. Banks, which have already reached this level, may maintain or improve their position.
All securitised loans of direct advances to agriculture, the Committee feels may be treated as a bank's direct lending to agriculture under the priority sector. Similarly, if the securitised assets represent indirect finance to agriculture, the investment in such assets may be treated as indirect finance to agriculture. At present, securitisation of assets by banks is not reckoned for the purpose of computing their priority sector lending.
