Banks must lend 8% credit to small, marginal farmers

The Reserve Bank on Thursday revised priority sector lending norms, asking banks to give 8 per cent of the total credit to small and marginal farmers. It also widened the definition of priority sector by including medium enterprises, social infrastructure and renewable energy while retaining the lending target to the sector at 40 per cent.

Changes have however been made in certain sub-categories by fixing lending targets. Also, the distinction between direct and indirect agriculture has been dispensed with and loans to food and agro processing units will form part of agriculture. Eight per cent of total bank credit prescribed for small and marginal farmers within the agriculture segment has to be achieved in a phased manner -- 7 per cent by March 2016 and 8 per cent by March 2017, RBI said. Overall target for agriculture has been kept unchanged at 18 per cent. For micro enterprises, 7 per cent lending by March 2016 and 7.5 per cent by March 2017 has been prescribed. However, there will be no change in the 10 per cent loan target for weaker sections. Existing categories in priority sector include agriculture, micro and small enterprises, export credit, education and housing loan. 

RBI said foreign banks with less than 20 branches will have to move to total priority sector target of 40 per cent, on par with other banks by 2019-20. Overdraft facility under Pradhan Mantri Jan Dhan Yojna (PMJDY) would also be considered as priority sector lending. RBI said overdrafts extended by banks for up to Rs 5,000 in case of Pradhan Mantri Jan Dhan Yojna  accounts would be considered as priority sector lending (PSL). It would however qualify only if borrowers’ household annual income does not exceed Rs 1 lakh for rural areas and Rs 1.60 lakh for non-rural areas.