Lok Sabha Question No. 1065 (UNSTARRED), answered on 2016-04-29
Subject: Loan Target to Farmers
Ministry: FINANCE
Asked by: A.T. (NANA) PATIL

## Government of India Ministry of Finance Department of Financial Services

## LOK  SABHA

Unstarred Question No. †1065

To be answered on April, 29, 2016/Vaisakha 9, 1937 (Saka)

## Loan Target to Farmers

## Question

†1065 SHRI A.T. NANA PATIL:

Will the Minister of FINANCE be pleased to state:

(a) the number of banks in the country which are as per rule extending as loans upto 18 per cent of their balance sheets to the farmers;

(b) if so, the details thereof;

(c) whether some incidents of frauds in achieving targets by certain banks have been reported and if so, the details thereof; and

(d) the steps taken by the Government to ensure the availability of loan to the farmers and to prevent incidents of fraud by certain banks in this regard?

## The Minister of State in the Ministry of Finance (Shri Jayant Sinha)

(a)  &  (b)  As  per  Reserve  Bank  of  India  (RBI)'s  extant  guidelines  on  Priority  Sector  Lending (PSL),  all  Domestic  Scheduled  Commercial  Banks  have  been  mandated  to  earmark  18%  of their  Adjusted  Net  Bank  Credit  (ANBC)  or  Credit  Equivalent  amount  of  Off-Balance  Sheet Exposure (OBE), whichever is higher, as on the corresponding date of the previous year, for lending to Agriculture. Foreign banks with 20 branches and above have to achieve the target for lending  to  Agriculture  within  a  maximum  period  of  five  years  starting  from  April  1,  2013  and ending on March 31, 2018, as per the action plans submitted by them and approved by RBI.

RBIhas reported that out of 47 scheduled public sector banks / private banks, 32 banks did not achieve agriculture target of 18% as on March 31, 2015, as per details given in Annex. RBI has further  reported  that  Scheduled  Commercial  Banks  having  any  shortfall  in  lending  to  priority sector shall be allocated amounts for contribution to the Rural Infrastructure Development Fund (RIDF) established with NABARD and other Funds with NABARD/NHB/SIDBI/MUDRA Ltd., as decided by RBI from time to time.

(c) & (d): RBI has reported that in the past there have been some media reports alleging that the subsidized farm credit is being used for arbitrage. RBI & National Bank for Agriculture & Rural Development (NABARD) advised banks on 9.11.2012 and 27.12.2012 respectively to ensure end-use of crop loans under Interest Subvention Scheme. The Government had also instructed all Public Sector Banks (PSBs), Regional Rural Banks (RRBs) and State Cooperative Banks on 12.11.2013 to strengthen their system  for pre-sanction scrutiny and  post-disbursement supervision  and  also  consider  carrying  out  post-disbursement  audits  to  ensure  that  all  crop loans for which interest subvention was being claimed were used for stated purposes and that there was no diversion of funds. These instructions were again reiterated by the Government on 31.10.2014  to  all  lending  institutions  and  they  were  also  advised  not  to  claim  any  interest subvention  for  loans  not  meeting  the  criteria  prescribed  by  RBI  for  short-term  crop  loans. Besides, RBI has issued instructions on March 11, 2015 to all scheduled commercial banks to undertake  some  additional  corrective  steps  in  implementation  of  interest  subvention  scheme, immediately.

The following major steps have been taken by Government to ensure availability of hassle-free loan to farmers:

-  The guidelines  on  Priority  Sector  Lending  (PSL)  of  RBI  mandate  all  Domestic  Scheduled Commercial  Banks  to  earmark  18%  of  their  Adjusted  Net  Bank  Credit  (ANBC)  or  Credit Equivalent amount of Off-Balance Sheet Exposure (OBE), whichever is higher, as on the corresponding date of the previous year, for lending to Agriculture. Foreign banks with 20 branches and above have to achieve the Agriculture Target within a maximum period of five years starting from April 1, 2013 and ending on March 31, 2018.
-  Government sets annual target for the flow of credit to the agriculture sector. Banks have been consistently surpassing the annual target.
-  With a view to ensuring availability of agriculture credit at a reduced interest rate of 7% p.a. to  farmers,  the  Government  of  India  implements  an  interest  subvention  scheme  for  short term crop loans up to Rs. 3.00 lakh. Under the said scheme, additional subvention of 3% is given to those farmers who repay their short term crop loan in time, thereby reducing the effective rate of interest to 4% p.a. for such farmers.
-  In order to ensure that all eligible farmers are provided with hassle-free and timely credit for their  agricultural  operations, the Government has introduced the Kisan Credit Card (KCC) Scheme, which enables them to draw cash to purchase agricultural inputs such as seeds, fertilizers, pesticides as well as meet other agricultural and consumption needs.
-  The KCC Scheme has since been simplified by providing the farmers with ATM enabled debit card based on one-time documentation and built-in cost escalation in the limit, etc.
-  To bring small, marginal, tenant farmers, oral lessees, etc. into the fold of institutional credit, Joint Liability Groups (JLGs) have been promoted by banks.
-  Banks have been advised by RBI to waive margin/security requirements of agricultural loans upto Rs.1,00,000/-, vide RBI's circular dated 18 th  June, 2010.
-  RBI  has  issued  Standing  Guidelines  for  Relief  Measures  to  be  provided  by  respective lending  institutions  in  areas  affected  by  natural  calamities  which,  inter  alia,  include identification of beneficiaries, restructuring of existing loans, extending fresh loans, relaxed security and margin norms, moratorium, etc. The Guidelines have been so designed that the moment  calamity is declared by the concerned District Authorities they are automatically  set  in  motion  without  any  intervention,  thus  saving  precious  time.  The benchmark for initiating relief measures by banks has also been reduced to 33% crop loss in line with the National Disaster Management Framework.

Annex

Details of 32 banks which did not achieve agriculture target of 18% as on March 31, 2015

|   Sr No. | Name of Bank              |   Agriculture Achievement (As %of ANBC) FY 2014-15 |   Shortfall in percentage |
|----------|---------------------------|----------------------------------------------------|---------------------------|
|        1 | Allahabad Bank            |                                              17.99 |                      0.01 |
|        2 | Bank of Baroda            |                                              13.13 |                      4.87 |
|        3 | Bank of India             |                                              16.16 |                      1.84 |
|        4 | Bank of Maharashtra       |                                              16.96 |                      1.04 |
|        5 | Corporation Bank          |                                              13.56 |                      4.44 |
|        6 | Dena Bank                 |                                              14.62 |                      3.38 |
|        7 | IDBI Bank Ltd.            |                                               9.99 |                      8.01 |
|        8 | Indian Overseas Bank      |                                              17.92 |                      0.08 |
|        9 | Oriental Bank of Commerce |                                              15.56 |                      2.44 |
|       10 | Punjab and Sind Bank      |                                              14.45 |                      3.55 |
|       11 | State Bank of India       |                                              15.01 |                      2.99 |
|       12 | State Bank of Patiala     |                                              17.13 |                      0.87 |
|       13 | State Bank of Travancore  |                                              16.63 |                      1.37 |
|       14 | UCO Bank                  |                                              13.44 |                      4.56 |
|       15 | Union Bank of India       |                                              16.09 |                      1.91 |
|       16 | United Bank of India      |                                              12.86 |                      5.14 |
|       17 | Vijaya Bank               |                                              13.34 |                      4.66 |
|       18 | BharatyaMahila Bank       |                                               6.42 |                     11.58 |
|       19 | Axis Bank                 |                                              11.97 |                      6.03 |
|       20 | Development Credit Bank   |                                              13.06 |                      4.94 |
|       21 | HDFC Bank                 |                                              17.82 |                      0.18 |
|       22 | ICICI Bank                |                                              12.08 |                      5.92 |
|       23 | Indusind Bank             |                                              13.17 |                      4.83 |
|       24 | ING Vysya Bank            |                                              14.19 |                      3.81 |
|       25 | Jammu & Kashmir Bank      |                                              14.43 |                      3.57 |
|       26 | Karnataka Bank            |                                              16.79 |                      1.21 |
|       27 | Kotak Mahindra Bank       |                                              16.9  |                      1.1  |
|       28 | Tamilnad Mercantile Bank  |                                              13.04 |                      4.96 |
|       29 | Catholic Syrian Bank      |                                              13.41 |                      4.59 |
|       30 | Federal Bank              |                                              16.59 |                      1.41 |
|       31 | South Indian Bank         |                                              11.81 |                      6.19 |
|       32 | Yes Bank                  |                                              15.33 |                      2.67 |

Source : Reserve Bank of India