With fears of below normal monsoon, agriculture lending may remain flat for most public sector banks on expectations of average kharif crop production.

A senior State Bank of India official said, “We may not go aggressive on increasing our lending to the segment, though our lending will be need-based. If reports of deficiency of 7 per cent in the monsoon holds true, no major impact is seen,”

The government’s official weather forecaster on Monday said it expected monsoon rainfall this year to be 93 per cent (of the long period average), against the 95 per cent it had projected earlier — both levels are considered sub-normal. For State Bank of India, the share of direct loan to agriculture remained flat in the last quarter of FY14, with an exposure of about ₹1,20,000 crore.

In the first quarter of FY15, SBI’s agriculture exposure in the first two months has been ₹1,000 crore.

According to a Bank of India official, the bank may just about achieve its priority sector lending targets. “About two-thirds of our branches are in the rural areas. Hence, agriculture lending is the only viable business,” the banker said.

Negative sentiment The banker added that there is a negative sentiment surrounding the loan waiver scheme in Andhra Pradesh and Telangana, as it may increase deliberate default of loans by farmers who are well off. However, banks remain cautious when it comes to fresh loan exposure to old borrowers who do not repay dues.

Another banker said the geographical distribution of agriculture loans may not be even and the lending will be tilted towards more advanced and good monsoon regions.

In the last financial year, the second-largest public sector lender, Bank of Baroda, opened three Agri Loan Factories on pilot basis in its Gujarat, Western UP, and ‘Bihar, Orissa & Jharkhand’ zones. In Q4FY14, Central Bank of India’s share of agriculture loan increased to 17 per cent from 14 per cent a year ago.

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