Money & Banking

Credit flow to farm sector will improve

| Updated on: Mar 01, 2011

Banks are confident of meeting the increased target for lending to the agriculture sector, as announced in Budget 2011-12.

The extension of the interest rate subvention scheme for short term crop loans will boost the credit flow to this sector, said bankers.

The target for credit flow to farmers has been increased from Rs 3.75-lakh crore to Rs 4.75-lakh crore for 2011-12. Banks have also been asked to step up direct lending for agriculture and credit to small and marginal farmers.

The existing interest subvention scheme of providing short term crop loans to farmers at 7 per cent interest will be continued during 2011-12.

The Budget has also enhanced the additional subvention to those farmers who repaid their crop loans on time to 3 per cent from the existing 2 per cent in 2011-12. Thus, the effective rate of interest for such farmers will be 4 per cent per annum.

Credit deployment

According to the RBI's latest data on sectoral deployment of bank credit, the outstanding credit to agriculture and allied activities, as on January 28, 2011 was to the Rs 4.38-lakh crore.

According to Mr M. Narendra, CMD, Indian Overseas Bank, following the farm loan waiver and relief packages announced by the Government two years ago, there was some slowdown in the flow of credit to the farm sector. But in the next fiscal there is enough opportunity for banks to lend more to this sector. As the Budget has several measures which will improve funding for land purchase, building of cold storage and warehouses. To that extent there is enough scope to meet the target of additional Rs 1-lakh crore, Mr Narendra added.

Mr D. L. Rawal, CMD, Dena Bank said that the higher target for agriculture is a growth of 25 per cent, which will not be difficult for banks to achieve.

Published on March 01, 2011

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