The Hindu Business Line : Pvt banks sceptical on farm lending targets

WHILE the public sector banks have heartily agreed to meet the Finance Minister's ambitious targets of 30 per cent growth in farm lending, most private sector banks are sceptical about the numbers.

"How can we draw up such aggressive targets when we have a limited rural branch network to do agri lending,'' is the typical private banker's excuse.

Private banks such as HDFC Bank, IDBI Bank, UTI Bank are not ready to commit the numbers or targets at the moment. "We will wait for the detailed policy which should come from the Finance Ministry and the RBI before we draw up our numbers,'' said the credit head of a private sector bank. His bank like most other private sector banks fall short of meeting the RBI mandated, sectoral target for direct agri lending set at 13.5 per cent of net credit of the previous fiscal.

A Finance Ministry spokesperson has clarified that private banks are also bound by the Finance Minister's Minister's announcements on agri lending target.

ICICI Bank seems to be the only bank with plans to overshoot the FM's growth numbers with a farm lending growth target of over 60 per cent to an outstanding of Rs 7,000 crore by year-end. According to Ms Zarin Daruwala, Joint General Manager, Rural micro finance and agriculture group, ICICI Bank, "The 30 per cent target is achievable if money is put into chunky, rural infrastructure such as irrigation projects, rural roads and cold storages, all of which will have positive ripple effects.''

Among private bankers, there are divergent views on whether agri lending is commercially viable or not. They say that they have not burnt their hands yet because it is comparatively a new business and they have learnt from the mistakes of the PSU banks.

On the other hand, the head of a private bank on condition of anonymity, said, "Agriculture is not such a great business that we are ready to sink loads of money into it like the FM wants. With the recovery rate at 70-75 per cent, the write off is as high as 30 per cent, so why should we go for this business when the industrial sector recovery rate is much higher at 94 per cent. Is the Government going to reimburse us for the losses suffered?''

The Finance Minister's target of 30 per cent growth in farm advances is ambitious, no doubt when the net bank credit for 2003-04 had merely jumped by something like 17 per cent. Mr A. Sethumadhavan, Chairman of South Indian Bank, also feels the challenge should be taken up. "When we are doing restructuring for big companies through the Corporate Debt Restructuring Cell why not for the poor farmer also,'' he said.

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