PSU Banks unable to reach 18% agriculture advances target
By Vaibhav Aggarwal
May 13, 2010
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Public sector banks like Bank of Baroda, Corporation Bank and United Bank of India (UBI) have been unsuccessful in achieving the 18% agriclutural advance target that was set for the year 2009-10.

Banks defend their failure saying that it is difficult to maintain the regulatory norms in this regard as their corporate as well as retail loan growth far exceeds the agricultural credit intake.

According to Corporation Bank executive director Asit Pal, banks found it very difficult to stick to the norms in a situation of fast growth in credit.

Bankers also say that the lending scenario in agricultural sector is highly climate dependant and the year 2009-10 has been a season of heavy monsoons and drought.

It has been directed that banks should lend 18% of their net bank credit to agriculture of which 13.5% has to be lent to farmers directly. Banks which are unable to meet the target are required to make up for it by contributing to the Rural Infrastructure Development Fund (RIDF) at a lower return than what would have been earned through agricultural credit.

Bank of Baroda has said that the total agricultural lending of the bank is 17% of the total credit disbursed and Union Bank of India has it around 16%.

"For us, it (the shortfall) is a historical problem and we are facing it difficult to bridge the gap amid fast overall credit growth," said Bank of Baroda executive director RK Bakshi.


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