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Under priority sector lending norms, bank loans to farmers to touch Rs 85,000 crore: SBI

"As per our estimates, if banks have to meet the 7 per cent target by March 2016, an amount of Rs 85,000 cr needs to go to the small and marginal farmers."

PTI|
Last Updated: Apr 28, 2015, 10.40 PM IST
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"As per our estimates, if banks have to meet the 7 per cent target by March 2016, an amount of Rs 85,000 cr needs to go to the small and marginal farmers."
"As per our estimates, if banks have to meet the 7 per cent target by March 2016, an amount of Rs 85,000 cr needs to go to the small and marginal farmers."
MUMBAI: The new priority lending norms issued by the Reserve Bank will ensure a 40 per cent increase in credit flow to the under-funded segment of small and marginal farmers at Rs 85,000 crore this fiscal, the economic research department of SBI said today.

Under the priority lending norms, it wants banks to lend 7 per cent of their total advances to small and marginal farmers.

"As per our estimates, if banks have to meet the 7 per cent target by March 2016, an amount of Rs 85,000 crore needs to go to the small and marginal farmers considering a credit growth of 15 per cent in FY 2016, which will be 40 per cent more than last fiscal's." it said in a note.

In the revised guidelines on the priority sector lending (PSL) made effective last week, the Reserve Bank has asked for a staggered increase in credit to the small and marginal farmers under the mandatory credit outgo to weaker sections of the society.

The small and marginal farmers is a newly-introduced segment which will be a part of the overall 18 per cent credit allocation for agriculture. The RBI has dispensed away with the earlier distinction between direct and indirect lending.

"A target of 8 per cent of annual net bank credit or credit equivalent amount of off-balance sheet exposure, whichever is higher, has been prescribed for small and marginal farmers within agriculture, to be achieved in a phased manner i.e., 7 per cent by March 2016 and 8 per cent by March 2017," the RBI said in its new PSL guidelines last week.

It can be noted that recent events like the unseasonal rains in central and northern states have aggravated the stress among the farmers.

"Overall, the new rules are positive and could be a game changer for banks with more focused and inclusive lending," the SBI note said.

It noted that as per the bank's suggestion, agri infrastructure, including construction of storage facilities, watershed development has been added to the priority sector lending.

That apart loans to food and agro processing units, which were a part of micro and small enterprises earlier, will now be a part of agriculture and will encourage banks of covering the entire agricultural value chain, it said, adding this will result in an improvement in productivity, storage and distribution.

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