106
Large Expansion of Eligible Categories
The first one concerns the unduly large expansion of the list of eligible
categories under the priority sector loans scheme, which is against its spirit.
As referred to above, it was hoped that the Nair Committee would recommend
pruning it on the obvious ground that “the more sectors we include in priority
sector lendings (PSL), the more they will compete for the same fixed pool
of resources and crowd each other out (ibid, p.1408). No attempt has been
made either in the recommendations of the Nair Committee Report or in
the RBI’s revised priority sector guidelines to correct the above distortions.
On the contrary, the Nair Committee has recommended that the distinction
between “direct’ and “indirect” agricultural lending be done away with, thus
allowing farmers engaged in production activity to compete with the traders
engaged in storage and distribution of inputs in the agriculture value chain
on the specious plea that “agriculture is an important sector considering the
livelihood it generates for almost two-thirds of India’s population. It is also
critical for ensuring food security and poverty alleviation and this sector needs
to be seen as a single set of activities encompassing production, storage and
distribution. As there is a seamless interconnectedness of the entire agriculture
value chain, its impact on output, income and employment in rural economy is
highly positive” (Nair Committee Report 2012, pp.vii-viii).
Fortunately, the RBI did not accept the proposal to dispense with the
direct and indirect distinction on the ground that “the focus of the guidelines
is on direct agricultural lending to individuals, Self Help Groups (SHGs) and
Joint Liability Groups (JLGs)” (Chakrabarty 2012, p.1822). However, the
RBI’s revised guidelines on priority sector lendings go entirely counter to the
very principle of eligible sectors being restricted to a select few so as to derive
the maximum benefit “from the perspectives of improving livelihoods”.
As enumerated below, the Nair Committee sought to considerably expand
the scope of certain kinds of indirect advances on the ground of accounting for
inflation. Thus, the maximum loan against pledge/hypothecation of agricultural
produce up to 12 months was raised from
`
10 lakh to
`
20 lakh and similarly, for
bank credit for purchase and distribution of inputs for the allied activities, and
for dealers in drip/sprinkler irrigation system and in agricultural machinery,
the limit was raised from
`
30-40 lakh to
`
70 lakh.
In respect of both of the above cases, the RBI has further expanded their
scope and coverage. As shown below, the RBI guidelines have finally raised
the first limit to
`
25 lakh from
`
20 lakh proposed by the Nair Committee and
second limit to
`
1 crore from
`
70 lakh.
