RBI takes govt cue, calls for agricultural credit review

The Reserve Bank of India has called for a comprehensive review of various schemes for enhancing rural credit and agricultural development.

The review assumes significance in light of the fact that agriculture and rural credit has been announced as a priority area by the new Congress-led government.

According to banking sources, banks have been asked to contribute to the extent of their short fall in agricultural lending to the corpus agricultural infrastructure and credit fund.

Thefund, otherwise known as Lok Nayak Jai Prakash Narayan Fund, was conceived with an initial corpus of Rs 12,000 crore in the first year of operation 2004-05.

The requirement for banks' funding arises as it could no more be funded under the Rural Infrastructure Development fund ( RIDF).

Last year, the RBI, with the approval of the government, had reduced the deposit and lending rates under the Rural Infrastructure Development Fund by 200 basis points with effect from November 1,2003.

This was done to discourage banks from avoiding agricultural lending and putting the money instead in RIDF to earn interest. This has turned into investment avenue and not lending, bankers said.

Giving a further boost to lending under the Prime Minister Rozgar Yojana (PMRY), the cut-off period for sanction and completion of disbursement for 2003-04 has been extended to September 30,2004 against the close of the financial year.

On the other hand, in a review of last year's progress under the Kisan credit Card (KCC), the RBI has urged banks across the board to issue KCC to all eligible agricultural borrowers as fast as possible in their area of operation.