Overall direct lending to farmers should not fall below average of past 3 years: RBI

The target for direct lending by banks to agriculture under Priority Sector Norms stands at 18 percent out of total 40 percent target fixed under priority sector lending.

Created On: Jul 17, 2015 11:11 IST

Reserve Bank of India (RBI) on 16 July 2015 directed banks to ensure that their overall direct lending to farmers should not fall below the average of last three years.

The direction was given by RBI against the backdrop of government expressing concern over adverse impact of any reduction in direct credit, given the adverse weather conditions.

Further, the RBI warned the banks that direct lending below the target set for priority sector lending will attract usual penalties.

The apex bank also said that banks should also continue to maintain efforts to reach the level of 13.5 percent direct lending to beneficiaries who earlier constituted the direct agriculture sector.

In an effort to increase direct lending to agriculture, the RBI in April 2015 revised the target for direct lending to small and marginal farmers under priority sector norms to 7 percent for 2015-16 and to 8 percent for 2016-17.

Direct lending to the most disadvantaged farmers, the small and marginal farmers, has been around 6 percent of Adjusted Net Bank Credit (or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher).

Also, the distinction between direct and indirect agriculture has been dispensed with and loans to food and agro processing units will form part of agriculture. Banks' overall target for agriculture stands at 18 percent.

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