Banks gear up to double farm credit

With the Centre planning to double the farm credit in the next three years from Rs 80,000 crore in 2003-04 to over Rs 1,60,000 crore, the nationalised banks have all geared up to implement new schemes to enhance the farm credit by over 30 per cent over last year.

"While the Centre is putting the focus back on rural India and putting a thrust on increasing access to agricultural credit, there would be increasing pressure on the banking system to extend itself to the agriculture sector in a big way. The quantum of farm credit will be enhanced from Rs 80,000 crore to Rs 1,05,000 crore during the current financial year. The ministry has ordered the banks to ensure 30 per cent growth over the credit extended during the year 2003-04," N S Sisodia, secretary, banking division, Ministry of Finance told Business Standard, here.

While Sisodia sounded confident about banks' increasing role in rural financing, Bank of Baroda (BoB) has drawn an aggressive plan for agriculture credit and is targeting 35 per cent growth in its overall farm lending.

The bank has targeted a disbursal of Rs 3,275 crore for the agriculture sector in the current financial year compared with Rs 2,432 crore in the last financial year.

"The bank intends to increase its share in agricultural credit from 15 per cent last year to 18 per cent by the end of the current financial year and double its agriculture lending in the next three years," said P S Shenoy, chairman and managing director, BoB.

Last year, the bank has financed over 45 per cent in the primary sector, which includes 15 per cent for agriculture, 15 per cent for small sector industries (SSIs) and the remaining in other primary sectors.

Of the remaining 55 per cent, the bank has financed 20 per cent in the medium scale industries, 20 per cent in the large scale industries and 15 per cent in the retail banking sector.

The bank has lowest interest rates for financing the agricultural sector, which is 8.5 per cent up to Rs 50,000 and at present the average interest for the rural sector stands at around nine per cent compared with 11 per cent previously.

To double its exposure to the agriculture sector within 2007, Indian Bank has also drawn up a four year Agriculture Credit Plan (ACP).

"The bank has projected an ambitious growth of 37 per cent at Rs 810 crore for the current financial year. The disbursal target for the current year is estimated to be around Rs 1,840 crore," M B N Rao, chairman and managing director, Indian Bank said.

The bank proposes to employ over 100 farm graduates for six months for effective marketing of agricultural schemes and products.

The banks plans to implement several schemes such as Golden Harvest Scheme, I B Mortgage Scheme, establishing Micro Credit Kendra's and formation of SHG's amongst others to provide impetus to the agriculture sector.

For Dena Bank, priority sector advances constitute 44.64 per cent of the bank's net credit, compared with the requirement of 40 per cent prescribed by the RBI.

The agricultural advances constituted 18.52 per cent of the net bank credit. Under the special agricultural credit plan, the bank has exceeded the target, as the achievement during 2003-04 was 103.80 per cent.