By Manju
SBI, ICICI Bank, Axis Bank, HDFC Bank not
lending enough to the poor, farmers
The Reserve Bank of India (RBI) is expected
to closely examine why banks are failing to meet priority sector lending
targets and the limits set for agricultural advances and weaker sections of
society.
The end use of agricultural credit contracted under the interest subvention scheme will be under the regulator’s scrutiny, so that agricultural advances at special rates of interest are directed at agriculture and not diverted for other purposes.
A senior RBI official told Financial Chronicle that the end use of all bank credit should be examined to find out if promoters are diverting money. “But in agriculture, it is more important as government gives a subvention.”
Among the bigger banks, ICICI Bank, Bank of India and Union Bank of India have not met the overall targets for priority sector advances, agricultural advances or the weaker section advances for financial year 2012, according to a report by Espirito Santo Securities. All other banks including, State Bank of India are finding it difficult to meet the agriculture sub-targets due to lesser bankable people and projects.
Barring Punjab National Bank (PNB), which has been consistently meeting both the overall limit and sublimit, almost all other banks are struggling to meet the targets. In 2011-12, Bank of Baroda joined PNB to be the only other bank to achieve its targets.
KR Kamath, chairman and managing director, PNB, said, “About two-thirds of our branches are in rural and semi-urban areas and we have a system in place for lending to agriculture, which helps us meet priority sector lending targets.”
A spokesperson for ICICI Bank claimed that the bank was committed to achieve its PSL target. “Overall, we achieved 95 per cent of our PSL target for the financial year 2012. The shortfall in direct agri-lending and weaker section lending in FY12 were at levels similar to those of the previous year. We are striving to increase the priority sector loans across these segments. Last year, the bank has already set up a dedicated team to serve these markets, besides increasing the branch network itself in these areas. We offer the full suite of products and services such as Kisan Credit Card, agricultural term loans, self-help groups, tractor loans, business loans, and others through our rural and semiurban branch network in these markets,” the spokesperson said.
While HDFC Bank and Axis Bank have met their overall priority sector target of 40 per cent of total advances, they have not met the sub-limits for agricultural advances or the weaker section advances for the past three financial years in a row. The banks refrained from responding to email questionnaire despite reminders.While speaking at a Nabard function on July 12, RBI governor, D Subbarao said, “We need further studies to understand whether the interest subvention scheme is distorting the flow of agricultural credit. Anecdotal evidence suggests that some agricultural loans, contracted at a sub-market rate of interest because of the subvention are being diverted for non-agricultural purposes. This evidently defeats the objective of the subvention scheme and needs to be corrected either by remodelling the subvention scheme or through tighter monitoring of the end use of agricultural loans.”
Under the special subvention scheme, banks can lend at 9 per cent with a 2 per cent interest subvention and an additional 1 per cent for timely repayment.
Priority sector advances are 40 per cent of the adjusted net bank credit (ANBC), of this 18 per cent is for agricultural advances, 4.5 per cent direct agricultural lending and 13.5 per cent of indirect lending, weaker sections is 10 per cent of ANBC.
Meanwhile, on Friday RBI issued revised guidelines on priority sector lending, which keeps the overall priority sector target at the same level, but enhances the loan limit for home loans, small scale industries and education loans so that larger loans could be part of the priority sector lending.
manjuab
@mydigitalfc.com
The end use of agricultural credit contracted under the interest subvention scheme will be under the regulator’s scrutiny, so that agricultural advances at special rates of interest are directed at agriculture and not diverted for other purposes.
A senior RBI official told Financial Chronicle that the end use of all bank credit should be examined to find out if promoters are diverting money. “But in agriculture, it is more important as government gives a subvention.”
Among the bigger banks, ICICI Bank, Bank of India and Union Bank of India have not met the overall targets for priority sector advances, agricultural advances or the weaker section advances for financial year 2012, according to a report by Espirito Santo Securities. All other banks including, State Bank of India are finding it difficult to meet the agriculture sub-targets due to lesser bankable people and projects.
Barring Punjab National Bank (PNB), which has been consistently meeting both the overall limit and sublimit, almost all other banks are struggling to meet the targets. In 2011-12, Bank of Baroda joined PNB to be the only other bank to achieve its targets.
KR Kamath, chairman and managing director, PNB, said, “About two-thirds of our branches are in rural and semi-urban areas and we have a system in place for lending to agriculture, which helps us meet priority sector lending targets.”
A spokesperson for ICICI Bank claimed that the bank was committed to achieve its PSL target. “Overall, we achieved 95 per cent of our PSL target for the financial year 2012. The shortfall in direct agri-lending and weaker section lending in FY12 were at levels similar to those of the previous year. We are striving to increase the priority sector loans across these segments. Last year, the bank has already set up a dedicated team to serve these markets, besides increasing the branch network itself in these areas. We offer the full suite of products and services such as Kisan Credit Card, agricultural term loans, self-help groups, tractor loans, business loans, and others through our rural and semiurban branch network in these markets,” the spokesperson said.
While HDFC Bank and Axis Bank have met their overall priority sector target of 40 per cent of total advances, they have not met the sub-limits for agricultural advances or the weaker section advances for the past three financial years in a row. The banks refrained from responding to email questionnaire despite reminders.While speaking at a Nabard function on July 12, RBI governor, D Subbarao said, “We need further studies to understand whether the interest subvention scheme is distorting the flow of agricultural credit. Anecdotal evidence suggests that some agricultural loans, contracted at a sub-market rate of interest because of the subvention are being diverted for non-agricultural purposes. This evidently defeats the objective of the subvention scheme and needs to be corrected either by remodelling the subvention scheme or through tighter monitoring of the end use of agricultural loans.”
Under the special subvention scheme, banks can lend at 9 per cent with a 2 per cent interest subvention and an additional 1 per cent for timely repayment.
Priority sector advances are 40 per cent of the adjusted net bank credit (ANBC), of this 18 per cent is for agricultural advances, 4.5 per cent direct agricultural lending and 13.5 per cent of indirect lending, weaker sections is 10 per cent of ANBC.
Meanwhile, on Friday RBI issued revised guidelines on priority sector lending, which keeps the overall priority sector target at the same level, but enhances the loan limit for home loans, small scale industries and education loans so that larger loans could be part of the priority sector lending.
manjuab
@mydigitalfc.com
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