Mumbai: Banks missed their loan target for the agricultural sector in the first half of the current fiscal year, lending even less than what they did during the year-ago period, raising concern in the institution mandated to ensure credit flows to farmers.
Scheduled commercial banks, regional rural banks and cooperative banks together lent Rs95,000 crore for agriculture in the first half of the current fiscal against a full-year target of Rs2.8 trillion, revised upward from Rs2.4 trillion last year, according to the National Bank for Agriculture and Rural Development, or Nabard.
Priority Lending: A file photo of a rural bank in Bharatpur, Rajasthan. Banks say they will try to make up the shortfall by lending more to farmers for the rabi sowing season that begins in November. The current account is going to be supported by the reduction in oil prices. Harikrishna Katragadda / Mint
In the year-ago period, they had lent Rs1.01 trillion to the farm sector. For the full year, lending totalled Rs2.44 trillion, exceeding the target.
Nabard has written to the banks, which divide the yearly target into quarterly and half-yearly goals, to bolster farm lending, according to bankers familiar with the matter.
Agriculture is one of the so-called priority sectors to which banks are mandated to channel 40% of their net credit. Banks are required to lend at least 18% of net credit to agriculture.
Bankers cite a range of reasons for the slow lending. The lenders’ preoccupation with identifying beneficiaries of the farm loan waiver, which ended on 30 June, shifted their focus from credit disbursals, some said.
“Traditionally, the majority of the disbursements always takes place in the second half,” said Ajay Banerjee, general manager for priority sector lending and retail credit at Bank of Maharashtra.
Bank of Maharashtra has an annual disbursement target of Rs2,700 crore, out of which it lent about Rs1,000 crore.
Banks say they will try to make up the shortfall by lending more to farmers for the rabi sowing season that begins in November. The rabi season borrowing starts in October and runs up to December. According to bankers, agriculture loan disbursements peak during this season.
“If we miss this season, we will miss the bus,” said Gobinda Banerjee, general manager for priority sector lending at state-owned Punjab National Bank, or PNB.
PNB has a full-year farm lending target of about Rs14,000 crore, out of which about 40% was achieved in the first half.
Even as banks try to step up lending to meet their targets, they are also cautious about overlending.
“Agriculture lending is highly technical, it has to be crop-specific and time-bound. Just as underlending does not serve the purpose, overlending also invites trouble. The farmer eventually has to return the money...,” said A.P. Ghugal, general manager for priority sector lending at Bank of India.
“In case he overshoots his limit, there is no way he can avail of loans for the next season,” he added.
According to bankers, Nabard has instructed banks to use self-help groups and micro-credit institutions to shore up their disbursals under the Special Agricultural Credit Plan, or SACP, that banks chalk out as their target. Every year the target is increased.
Some bankers say demand for agricultural loans has slowed without explaining why.
“There is no limit for such loan disbursal, but it appears that people are not coming forward to take loans. Efforts are being made to address this and we are pushing for such loans,” said K. Laxman Rao, general manager, priority sector lending, Union Bank of India.
The bank’s SACP target for the six months to September was Rs2,415 crore, out of which the bank lent Rs2,223 crore. For the full year, the bank has a target of Rs4,830 crore. “We are confident that with the rabi season disbursement, we will achieve our target,” said Rao.
According to a senior official with a large public sector bank, who spoke on condition of anonymity, the half-yearly lending target was missed partly because of the distractions created by frequent changes in guidelines for the farm loan waiver that caused banks to recalculate the write-offs that benefited 43 million farmers.
According to advance estimates of the agriculture ministry, farm production in the kharif crop season fell below target. The ministry estimated kharif foodgrain production at 115.3 million tonnes, below the target of 121.5 million tonnes and also lower than the year-ago period’s production of 121 million tonnes.
“The erratic rainfall was also a cause why kharif production suffered and that will be made good following with the rabi season,” said the same bank official.
This official said his bank had achieved 40% of its annual farm lending target till September and was using all its distribution channels to meet the target. “Rabi season is very important for us, we will make sure we achieve the target,” he added.
The rabi season is the most important crop season for India’s farmers, particularly in north India, where crops such as rice, wheat, oilseeds, pulses and sugar cane are harvested during the period.