Public sector lender UCO Bank has failed to classify loans worth Rs 4000 crore as farm loans. With these loans getting declassified, the bank has failed to meet priority lending target as these loans were agricultural loans and all banks have been mandated by Reserve Bank of India to classify 18% of their total lending as priority lending to the agriculture sector.

"These loans did not classify as agricultural lending after the regulator revised certain norms and hence, had to declassified," said Arun Kaul, chairman and managing director, UCO Bank.

"These loans were given to Rural Electrification Corporation that would deploy the funds in setting up pumps. However, RBI felt these could not be classified as agriculture loans," Kaul said.

The priority sector lending norms were revised last year by RBI.

There has also been a decline in retail lending on the part of the bank in the fiscal last ended.