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Sub-Targets for Small and Marginal Farmers
Another damage that the RBI’s new guidelines have inflected on its
own principles underlying these guidelines. The RBI has taken pleasure in
highlighting the four basic pillars/philosophy upon which these guidelines are
based; two important of these are:
“Priority sector refers to those sectors of the economy which,
though viable and creditworthy, may not get timely and adequate credit
in the absence of this special dispensation. Typically, these are small
value loans to farmers for agriculture and allied activities, micro and
small enterprises, poor people for housing, students for education and
other low income groups and weaker sections. Those sectors which are
able to get timely and adequate credit would not qualify for priority
sector status.
“Banks should lend directly to beneficiaries instead of routing
these loans through intermediaries. This will ensure better management
of risks and also reduction in transaction costs for such loans”
(Charkrabarty, October 2012, p.1821)
In the same vein, the RBI rejected the Nair Committee recommendations
for prescribing additional sub-targets for small and marginal farmers (More on
it later). It has justified it thus:
“though we have not prescribed fresh targets, the interests of
small and marginal farmers and other individuals will be taken care by
shifting the direct part of agricultural loans to corporates, partnership
firms and other institutions to indirect agriculture” (Charkrabarty,
October 2012, p.1822).
Revision of Limits for Agriculture Activities under Priority Sector
No.
Activity Description
Existing
Limits
Revised
Limits
RBI
Guidelines
1 Maximum loan against pledge / hypothecation of
agricultural produce up to 12 months [
Direct
loans to
farmers and
indirect l
oans to corporates, etc]
`
10 lakh
`
20 lakh
`
25 lakh
2 Credit for purchase and distribution of inputs for the
allied activities, dealers in drip / sprinkler irrigation
system / agricultural machinery [
Indirect
loans under RBI
guidelines]
`
40 lakh/
`
30 lakh
`
70 lakh
`
1 crore
Source:
(i) M.V. Nair Committee on
Report on Priority Sector Lendings,
February 2012 .
(ii) RBI
Guidelines on
“Priory Sector Lending – Targets and Classifications” dated July 20, 2012.
