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.

(This article was published on September 4, 2012)
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