Reserve Bank of India Deputy Governor K.C. Chakrabarty has expressed concern over banks lending more to the infrastructure sector.
“Infrastructure has no problem of credit. In fact, we are worried that banks are giving too much credit to infrastructure,” he told reporters on the sidelines of a summit organised jointly by FICCI and Indian Banks’ Association.
“I have no problem in banks lending to infrastructure companies, but don't ask us to classify it as priority sector lending,” Chakrabarty added.
Small-ticket lending to the infrastructure sector alone can be classified as priority sector lending, provided it meets the required norms, he said.
Agri credit and inflation
Banks should give more investment credit to the agriculture sector so that inflation can be brought under control, said Chakrabarty.
“Inflation cannot come down if agriculture lending is not encouraged…We need more investment in agriculture, especially at the individual farm level, besides crop loans,” he said.
Agriculture lending by banks is categorised under the priority sector lending (PSL). According to the RBI guidelines, every year banks have to lend 18 per cent of their adjusted net bank credit as on March-end of the previous year to the farm sector.
Foreign banks
Citibank, HSBC, StanChart, among others, which have a branch network of 20 and above will have to abide by the overall PSL target of lending 40 per cent of their adjusted net bank credit as on March-end of the previous year, according to RBI guidelines.
PSL includes loans given by banks to agriculture, micro and small enterprises, micro-credit, education and home loans.
“SME and agriculture sectors need new ideas and expertise … and foreign banks can play an active role in the PSL.
“Many foreign banks are coming to us to open more rural branches. Those who want to grow must do priority sector lending and participate in the growth story,” the deputy governor said.
Keywords: priority sector lending, RBI Deputy Governor KC Chakrabart, Ficci, Indian Banks Association
Comments:
Gentlemen,
Infrastructure is one of the capital-intensive sectors, having huge employment
potential and income-generation in the long-time horizon. It is the backbone of
any country. Treating lending to infrastructure sector as 'non-priority' merely
because the sector has huge funding already, is misconceived. With lending to
NBFCs out of priority sector tag recently, coupled with increasing NPAs in other
priority sectors [which proscribe further lending in such impaired accounts] & reluctance on the part of small & medium entrepreneurs to borrow more due
to the persistent recessionary trend/ uncertainty, where else can the banks
look to, for reaching their target/ sub-targets under priority sector?
Issues raised are important. A study dubs mega infra projects as “a
new political and physical and physical animal”; it says that mega
projects have strikingly poor performance records in terms of
enironment and public support”.Cost overruns and lower than predicted
revenue frequently place viability at risk and redefine projects that
were mooted as effective vehiclesto economic growth as possible
obstacles to such growth”. A Rand study notes: Such enormous sums of
money ride on the success of mega projects that companybalance sheets
and even government balonce of payment accounts can be affected for
years by outcomes…” A recent newspaper article puts our need for Rs.31
lakh crores on infra prjects =-bulk of it may go through another
current fashionable mantra –PPP. See the findings of CAG on Delhi and
Mumbai airport privatisation and modernisation. –worry of public
assets being ripped and public revenues being drained by greedy
corporates. Regulator and the government and ultimately
Dy. Governo’s concerns are valid therefore. People who have put ntheir
dsavintgs and deposits and invested shares ass tiny shareholders have
legitimate rights to raies these concerns.
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