The de-classification of the farm credit by the Reserve Bank of India in July last year is likely to create hindrance for Bank of India. The apex bank has mandated all the lenders to lend 20% to the priority sector. The target seems unlikely for the bank to achieve.
The Executive Director of Bank of Baroda, Mr. N. Seshadri said, "There is pressure on meeting priority sector targets and we have informed the regulators about this."
A senior officer at the bank said, "The growth number has to be seen in the light of the fact that RBI de classified loans given to co-operatives as non-priority, where we had substantial exposure. We had given loans to sugar cooperatives, which will not be a part of priority sector lending now. Going by the earlier norms, our exposure to agriculture is about 18-20%."
"Large banks have an exposure of Rs20-30 billion to accounts which the RBI no longer allows to be classified as farm loans. For Bank of India, adjusted growth in farm credit would be 17% year-on-year for 9M FY12 against the reported 1%. For Bank of Baroda it would be 23% yoy against the reported 12.2% for 9M FY12," said a report released by Standard Chartered Securities.