• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Our Bureau

MUMBAI, April 11

THE Finance Ministry has asked banks to prepare a long-term plan to meet the growing credit needs of the agricultural sector.

This follows the projection that growth in the agriculture sector would be over four per cent in the next decade as against the average growth of 2.9 per cent last year.

Recently in its approach paper, the National Agricultural Policy projected a four per cent growth in agricultural sector annually from the fiscal ended 2002-03 onwards for the next two decades.

This translates to the growth rate nearly doubling from the present levels in a decade's time. For the year 2001-02, the growth rate in agriculture has been to the tune of 2.93 per cent.

The Finance Ministry has asked banks to evolve a concrete plan on how financing towards the agriculture industry can be improved so that this four per cent growth projection can be achieved. The Indian Banks' Association has formulated a working group to examine the modalities where banks can help in financing agriculture to a larger extent.

Said one senior banker, "Banks have been asked to delineate how financing towards agriculture can be given a boost and also state the difficulties encountered by them in this financing.''

He added that the Government wanted banks to play an important role in lending more actively towards agriculture as public sector banks not only have a good network in rural areas but also have manpower, equipped to deal with such specialised lending.

According to bankers, for agricultural lending to be improved, the essential infrastructure in rural areas has to be improved along with necessary amendments to Land Reforms Act. Linkages such as marketing of agricultural produce and establishment of godowns, etc also had to be in place, said bank officials.

Most banks are unable to achieve the 18 per cent target of lending towards agriculture, with most banks' lending hovering at around 15-16 per cent.

A long standing demand of banks have been to include lending towards food and food processing units and loans to the Food Corporation of India (FCI) as lending towards the agricultural industry.

Banks have also told the RBI and the Finance Ministry to remove the limit of 18 per cent towards agricultural lending. Bankers argue that since the share of agriculture in the GDP has been declining with the share of some other industries rising, it is only fair that this limit of direct lending towards agriculture should be freed.

Send this article to Friends by E-Mail

Stories in this Section
Ministry urges long-term plan for farm sector credit

Copyright © 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line