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Pvt, foreign banks lag in priority loans

BS Banking Bureau

Even as the Reserve Bank of India is pushing commercial banks to increase exposure to the rural market (read priority sector advances) through higher credit limits in agriculture and small scale units, only public sector banks have been able to fulfill their priority sector advances, while private and foreign banks are way behind.

Banks have to apportion 40 per cent of their advances into priority sector lending. Of this, 18 per cent of total advances have to be flowed into agriculture with the remaining into SSI, weaker sections and others.

Banks are also required to provide 12 per cent of their advances to export credit. This is outside the ambit of priority sector lendings. However, foreign banks' export credit is a part of their total priority sector advances.

The total priority sector advances by banks as on March 23,2001 was Rs 1544.14 billion.

Priority sector advances by public sector banks was at Rs 1465.46 billion or 43 per cent of their total advances.

These banks have, however, also not been able to fulfill their quota in agriculture advances.

The total agriculture credit by banks was at Rs 536.85 billion or 15.7 per cent compared with the stipulated 18 per cent.

Credit to SSI units was at 14.2 per cent and for other priority sector, which includes small transport operators and self employed persons it was at 11.8 per cent.

Private banks have also been facing a severe problem in meeting the level of agriculture advances with their advances only at 9.6 per cent (Rs 53.94 billion) as on March, 2001, while total advances to the priority sector was at 38.2 per cent.

Advances to SSI units were at 14.4 per cent, while advances for the other priority sector was at 14.2 per cent.

The priority sector advances by foreign bank is much lower at 34 per cent with export credit at 20 per cent, while credit to SSI was at 11 per cent.

The RBI has in its credit policy increased the limits for financing of distribution of inputs for allied activities such as cattle feed, poultry feed, etc. to Rs 25,000 from the present limit of Rs 15,000.

The credit limits for marketing of crops (pledge financing) for farmers has also been increased from Rs 1,000 to Rs 5,000. The repayment schedules for this credit has also been doubled from 6 months currently to one year.

Private sector banks and foreign banks subscribe to the bonds of Nabard and other agencies to fulfill priority sector lending norms.

In the recent past these banks have also been tying up with companies and self-help groups for priority sector advances.

"ICICI Bank lends money to input companies which manufacture seeds and farm equipment.

These companies have started Kisan centres in many rural areas. ICICI Bank lends money to these centres who on-lend it to farmers in the form of seeds and other equipment.

"We have also tied up with companies such as HLL and Pepsi for on-lending to farmers who sell the farm produce to them," said an ICICI Bank official.

Public sector banks have an edge in agriculture financing as around 60 per cent of the branches are in rural and semi-urban areas.

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