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Rukmani Vishwanath

Banks are feeling the need to enhance the limits on such financing to agriculture to enable better flow of credit to the sector. Bankers contend that the scale of finances is not in alignment with the requirements of the farmers.

MUMBAI, Aug. 6

AS public sector banks get busy putting in place strategies to meet Reserve Bank of India's deadline for meeting the agriculture lending target at 18 per cent of their total net bank credit by March 2003, a key issue emerging as a point of debate is the need for autonomy for banks to fix their own limits on the scales of financing of crops.

Currently, the District Technical Committee consisting of banks and Government representatives stipulates limits on financing for different crops.

Banks are feeling the need to enhance the limits on such financing to agriculture to enable better flow of credit to the sector. At present, bankers contend that the scale of finances is not in alignment with the requirements of the farmers. Recently, the State Bank of India asked RBI for permission to increase its limits on its scale of financing to agriculture.

The bank has also taken up the matter with the IBA committee on agriculture finance at a recent meeting and the District Technical Committee that fixes limits on the scale of financing to agriculture for banks.

"The cost of cultivation and the scale of financing are currently mismatched. As a result, farmers may avail themselves of some credit from the bank, but since it is not adequate to cover their requirements, they go to moneylenders to raise the remaining amount,'' said an SBI official.

In fact, SBI had mooted the proposal last year itself. But it was unable to follow through with its plan, as per existing regulations all banks must follow a uniform scale of financing stipulated by the District Technical Committee.

"We think an increase in the scale of financing will definitely help us meet the stipulated 18 per cent of lending towards agriculture,'' the official said.

Meanwhile, other public sector banks like Bank of Baroda have started holding meetings with farmers and regular agricultural borrowers to discuss the areas where there is a need for credit.

"Banks now face a problem where the demand for credit from the agriculture sector exceeds the prescribed scales of finance by 50-60 per cent,'' said an official with the bank.

"We are also trying to identify the farmers who have not yet been brought into the fold of the bank,'' he said.

Banks are now awaiting the recommendations of the working group set up by the Indian Banks Association to study the flow of credit to agriculture.

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