Friday, July 27, 2012

Banks may find it tough to meet indirect agriculture lending target

Mumbai, July 26:  Achieving the indirect agriculture lending target under the revised Reserve Bank of India guidelines on priority sector lending may prove to be an uphill task for banks.

The reason: loans for food and agro processing units will now be classified under the Micro and Small Enterprises (MSEs) category, provided the units satisfy the investments criteria prescribed for the latter, say bankers.

A manufacturing unit is classified as a micro enterprise if investment in plant and machinery does not exceed Rs 25 lakh. If investment in plant and machinery is more than Rs 25 lakh but less than Rs 5 crore then a unit is classified as a small enterprise.

The annual targets for both direct and indirect agricultural lending are set at 13.5 per cent and 4.5 per cent of (adjusted) net bank credit (obtaining as on March-end of the preceding year), respectively. Bankers fear that the re-classification of loans to food and agro processing units as loans...

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