Summary

This document is study material for executives, focusing on agricultural credit. It discusses the vital role of agricultural credit in farm sector development and highlights the importance of various factors for success. This booklet is intended for internal use only.

Full Transcript

Mr V K A U M R U T Mr V rK VA A VA A T M T M...

Mr V K A U M R U T Mr V rK VA A VA A T M T M UN A V UN A K U A R UM R M AV U N Mr TV r K VA U R VA Reference study M material for A Tpromotion M rexercise T VA K M A U N A V 2025-26 N A U R of Executives M U AV N r K V A U AR M U M T rK V KU A R A VA N M A T Mr T V M U AV UN VA rK U AR KU M R M A U N M A TV Mr TV A r K U V A R AV UN V A M T M R A N VA r KU A V KU M AR U M A U N M A T r V K U A R V M T r V M A U N A VA N M V A T r KU V AR K U M A R U M A U N M A T r V K U A R V M A T M r V M A U N V A T A N V r KU V AR K U M A R U M A U N M A T r Baroda Academy V K U A R V M T r V M A U N A VA N M V A T K U A R BankUof M Baroda RU A N M r V K A U M R U V AT Mr A T V rK V A A For N V internal circulation only M A T M U A N V r KU V AR K U M A R U M A U N M Do Not Print A Tunless extremely rrequired. SaveTPaper, V Save Trees K U and preserve VA R M r M AV U N A V Environment.A M A T N V r KU V AR K UM A RU M A U N M A T r V K U A R V is to supplement M T A of the promotion r M aspirants. Topics V A This booklet M U N the learningAefforts V A T U incorporated R in nature and are indicative M U N Apex Academy advises the readers toVrefer Aetc. for N r K V A K U A R M U to Book of Instructions, M updated information. AT SOPs, Circulars, Master Circulars, Policy U guidelines, R V Mr A T V M r K V A A N V exam within booklet is focusingUmainly on the promotion This M A T R not be considered A N the Bank (basedV on r KU trends) and previous V Ashould K U M as an instruction A R U manual. Employees M A U N M are supposedAtoT update themselves r by reading Bank’s U and latest AR V circulars, guidelines K V other general M T A news. M r V bankingA M industry/ U N awareness related V A T U R M A U N A V r K V A KU AR M M T r V U V A M A T M rK M A U N AV U R M U N K A KU AR Mr T V r V A VA N M V AT U M R U MA K A U Mr A T V M r K V Mr V K A U M R U T Mr V rK VA A VA A T M T M UN A V UN A K U A R UM R M AV U N Mr A TV M r K VA K U A R V AGRI CREDIT T Mr V M A U N VAA Nto employment and A T VGDP. K U is a key sector A Rof Indian economy U M R U A N r Agriculture M technologies. However, V K in view of its contribution A U M R U A T any amountMofrcredit even at theTmost Agricultural credit plays a vital role in farm V reasonable ratesr Kcannot guarantee VA sector development and facilitates adoption of new V Afactors including higher productivity or adequate N income among the farmers, VAinputs, M upon many as the success depends otherT M U A N V A KU AR supporting the availability of agricultural services and remunerative markets for the products. U M R U M A U N r M The agriculturalAcredit V T policies designed K A r and implementedTin VIndia are mainly supply U R M r K driven through VA A V level credit, interest N V A and directed lendingMby way of regulatory T targeted ground M R U subvention scheme A N along with other Vpolicy A K U prescription under Priority Sector Lending guidelines. A U M have yielded commendableU These policies R A field of N r interventions M agricultural V at the level of Government and K RBI credit.THowever, agriculturalrsector still faces challenges A M results in the U formation, AR U A M T V r K such as lack of capital tenant farmers, V A V and share croppers regional disparity, dependence of farmers N A especially small and marginal farmers, Vcausing farmers’ distress M T landless labourers M U on non-institutional A sources of credit N at significantly A higher rates, V KU credit culture AandRweakening state M U A non-realization of the fair price for agricultural produce and farm loan waivers r impacting V Ufinances. R M U N M TOF PRIORITY SECTOR K r LENDING T V A K U A R V A M A r V INTRODUCTION A N V M A T TheU M U A Rin its meeting heldUonMJuly 24, 1968 emphasized N U the urgency forMcommercial V r K National Ainvolvement Credit Council V in financing the priority sector R A U N banks to increase their M Scale Industry A T Further emphasis K r the same was reflected A comprising agriculture V in the Reserve rBank K Uof India’s credit AR and Small- policy for theV (SSI). M on A T M V M A year 1967-68. N Usectors was formalised V A T U R M A in 1972 based UonNthe report submitted A V r K The description of the V A priority R Sectors constituted Uto Advances to theAPriority M by the U N M Reserve Bank Ain T1971. Although initially Informal Study Group on Statistics relating K rthere was no specific Vtarget fixed in respect U by the A R V M A T M r Kinoftheir priority sector T V M Ato the level of 33.33% U Nby March 1979. AV lending, in November 1974 the banks were advised to raise the share of these sectors aggregate A advances U R M U N A V N r K V A K U A R M U M the private sector: A T In November 1978, two objectives, focused r V towards rural credit were U given to the commercial K banks in A R V M A T M r V A U N33.33% of their total Vadvances towards N A T i. UM R A V To deploy a minimum K 1980 and draw A of U Mfor achieving the target. R U priority sectors by M A March 31, U N r M ii. To V Twithin a time-bound programme K a credit deposit ratior of at least 60% through A V their rural and semi-urbanU branches AR achieve V A M T r K V separately A a time-bound N programme. V A M A T TheU M Bank of IndiaRinU1980 implementedMthe A recommendationsUofNthe ‘Report of theAWorking V r K on the Modalities Group Reserve V Aof ImplementationKofUthe Priority SectorALending R and the 20-point M Economic U N M Programme byABanks’ T for achieving ther target of priority Tsector U V lending at 40% ofKaggregate bank A R advances byV1985 and for ensuringM that a substantial portion of the enhanced rflow of resources is V M directed to Athe weaker sections U N amongst them. A VA N M V A T r AR sectors: WhileKU Ki.UOverall target forVpriority M A R U to fix any annual M A target U N M within the overall A T target of 40% M it was not considered to rbe achieved by 1985,V banks were advisedKtoUensure that a appropriate A R minimumV of 40% of additional credit every year flowsA T M r T V M A U N A V to the priority sectors. A UMinimum target for Rlending to the agricultural In view U N V r K ii. V A K UMbankssector: A Rtoofensure M the prominent position A that Ui.e., advances M advances toAtheTpriority sector should agriculture occupied M r in the national economy, V were advised that at least K 40% of the to the A V sector should be extended to A T agriculture and allied r activities, M M agricultural U N AV be at least 16% of the total advances by 1985. N K U A R M Usectors are givenAproper U R attention M r the T underprivileged V iii. Sub-target for ‘Weaker Sections’ in agriculture sections in the r K priority and small-scale V industry: In order to ensure that by banks in credit V A M AT M A U N V K U A R U MA Mr A T V M r K V Mr V K A U M R U T Mr V rK VA A VA A T M T M UN A V UN A K U A R UM R AV M U N Mr A TV concept of ‘weakerM r K VA K Uindustries was AR V The ‘weaker sections’ allocation, the T sections’ comprising of agriculture and small-scale A sector comprisedMof: r T V M A introduced. U N V in agriculture and allied A A U R M U N A V N r K a. Small and marginal V A farmers with land K Uwhose holdings of 5 acres and A Rforlesssuch M and landless labourers; U M AT U R Mr V K A b. Persons engaged in allied activities borrowal limits activities not exceeding V Rs.10,000/- A T M r T V M A U N A Vfinancing agricultural A R therefore, banks N V r KUgrains productions, Subsequent food policies recognized V Aand the increasing K U M need for A R were directed to extend U direct finance toMagriculture operations for A increasing U N M (including alliedAactivities) T to at least 15% r of the total creditTbyVMarch 1985, 16%rbyKMarch U 1987 and AR 17% by MarchV 1989. M A M V A M FOR PRIORITY N USECTOR CLASSIFICATION V A T U R M A U N A V r K GUIDELINES V A U R M U N M I. CategoriesAunder T priority sector Mr K V A K U A R V T r V M A 1. Agriculture U N A VA N M V A T r KU3. Export CreditVAR 2. Micro, Small and Medium Enterprises K U M A R U M A U N M 4. Education A T r V K U A R V M A T M r V M A Infrastructure UN 5. Housing V A T 6. Social A N V r KU7.8. Renewable AR Energy V K UM A RU M A U N M Others A T r V K U A R V M T r V M A U N A VA N M V A T K U A R U M R U A N M r V K A U M R U V AT Mr A T V rK V A A N V M A T M U A N V r KU V AR K U M A R U M A U N M A T r V K U A R V M A T M r V M A U N V A T A N V r KU V AR K UM A RU M A U N M A T r V K U A R V M T r V M A U N A VA N M V A T K U A R U M R U A N Mr V K A U M R U V AT Mr A T V r K V A A N V M A T M U A N V r KU V AR K U M A R U M A U N M A T r V K U A R V M A T M r V M A U N V A T U R A N V r K V A K UM A RU U M A M A T M r V K V T r M A U N A VA N M r KU V AR U M A R U M A T M rK V A V N V AT U M R U MA K A U Mr A T V M r K V Mr V K A U M R U T Mr V rK VA A VA A T M T M UN A V UN A K U A R UM R M AV U N Mr A TV M r K VA K U A R V T Mr V II. M A U N Targets /Sub-targets for Priority sector A VA N A T V KU AR (i) The targets and sub-targets set under priority sector lending for all scheduled commercial banks M R U A N KU M U operating in India are furnished below: M r V A U R AT Mr V Categories Domestic scheduled commercial banks Foreign banks with less than V and foreign banks with 20 branches T 20 branches r K V A A N and above V A M A T M U U Priority Sector AR40 per cent of Adjusted A N U per cent of ANBC V r KTotal V [computation ofK UMisNet given below] A or Rcomputed in para M Bank Credit 40 A as U is higher; AR U N M A T M r ANBC Amount of V K 6 below or V Credit Equivalent A T Off- CEOBE whichever M r up to 32% can be V T M A U N Balance Sheet Exposure, whichever A V is out of which A U R higher. M N Vbe to in the form of lending to Exports U not less than 8%Mcan A N r K V A K U A R and U M Agriculture AT r of ANBC orTCredit V Not applicable any other priority K Usector A R V M 18 per cent r V M A U SheetNExposure, whichever A VisAhigher. Equivalent Amount of Off-Balance N M V A T r KU V AROut of which aKtarget UMof 10 percent# Ais RU M A U N M A T prescribed r V K U A R V M for Small and Marginal A T M r V M A 7.5 N Farmers U (SMFs). per cent of ANBCV or Credit Not applicable A T Micro Enterprises A N V r KU V AREquivalent AmountMof Off-Balance U K U A R M A U N M Advances to Weaker A T Sheet Exposure, whichever is higher r of ANBC or TCredit V Not applicable K U A R V M 12 percent# A M r V SectionsA M U N Amount ofAVOff-Balance Equivalent A T U RSheet Exposure, M whichever is higher U N A V N r K # Revised targets forV A weaker sections will K U A R M U M AT U R Mr V be implemented in a phased manner as indicated below V T rK V A A N V A M A T M U A N V r U Financial K2020-21 Year V AR8% Small and Marginal K U M Farmer Target Weaker A R 10% U Sections target M A U N M 2021-22 AT 9% r V 11% KU A R 2022-23 V 9.5% M A T r V A N V 11.5% M A T M 2023-24 U 10% A 12% N V r KU V AR K UM A RU M A U N M All domestic banks A Tand foreign banks withr more than 20 branches are directed to ensureU V system-wide K that the overall A R V The applicable lending to Non-Corporate Farmers M (NCFs) does not fall T A Non-Corporate Farmers below the r M (NCF) for FY 2024- average of the last three V M A years’ achievement. U N target for lendingAtoVthe A T 25 U will be 13.78% of ANBC R M U N or CEOBE whichever is higher. All efforts should be made by banks A V to N r K increase the Farm V A Credit) higher than the K NCFU target. A R M U M AT U R V Mr A T V M r K V A M A of Adjusted NetUBank N Credit (ANBC) AV A T Computation N V r KU Credit in IndiaV[As Bank ARprescribed in item K U M A No.VI of Form `A’ under R U I M A U N M Section 42(2) A T RBI Act, 1934] Mr of the V K U A R V with RBI andNother approved Financial T A Institutions r M II T V A Bills Rediscounted M U A V A UBank Credit (NBC)*AR N V r K Net V K UM A RU III(I-II) A U M M Outstanding Deposits T r V V A SIDBI and MUDRAMLtd in lieu of non-achievement under RIDF and A T other eligible funds with M rK IV M priority A lending targets/sub-targets NABARD, NHB, sector U N AV PSLCs UN + outstanding of K U A R M M r T V r KU V AR A VA N M V AT U M R U MA K A U Mr A T V M r K V Mr V K A U M R U T Mr V rK VA A VA A T M T M UN A V UN A K U A R UM R M AV U N Mr A TV M r K VA U KV A R V T Eligible amount for exemptions on issuance of long-term bonds for Mr V M A U N VA infrastructure and affordable housing as per circular DBOD.BP.BC. A N A T V KU AR No.25/08.12.014/2014-15 dated July 15, 2014 U M R U A U N r Advances extendedV in India against theK A VI M M deposits, qualifyingAT for exemption from incremental FCNR (B)/NRE U R MrCRR/SLR requirements, the ReserveVBank’s circulars DBOD.No.Ret.BC.36/12.01.001/ A T V as per r K V A datedM A 14, 2013 read with August U NDBOD.No.Ret.BC.93/ A V12.01.001/2013- N M 2013-14 V A T 14 U K dated January 31, R DBOD mailbox A2014, U Mclarification issuedRonU A N r M dated AugustA27, February 6, 2014 and V K UBD.BPD.(PCB).CIR.No.5/13.01.000/2013-14 A U M R U T 2013 read with M r UBD.BPD.(PCB).T Cir.No.72/ V r K V A A V dated JuneN11, 2014. 13.01.000/ 2013-14 V A M T M U RIndia A N V A K U by Government Investments A made by public sector banks in theM U Recapitalization Bonds R U VII A N r floated M Other investments V of K A U M R U A T eligible to beMtreated r as priority Tsector V (e.g. r K V A A Vin securitised notes)N VA M VIII T investments M U R and kept under A N V A r KU Value of securities Face V ARelease acquired K U MHTM category under A R U IX M A U N M read with Q.11AofTFAQ and SLF-MF-MPress the TLTRO 2.0 (Press r Release 2019-2020/2276 2019-2020/2237 dated April V 17, 2020 K U A R V A T r V dated April M A vide Press Release 27, 2020 and also U N2019-2020/2294 dated Extended Regulatory A V April 30, 2020. N M Benefits under SLF- V A T KU AR MF Scheme r Bonds/debentures inV Non-SLR categoriesK UMHTM category ARU X M A U N KXIU AR under M AT made after M r V non For UCBs: V T r V VA M T investments August 30, 2007 in permitted M A held under ‘HeldUto N A A SLR bonds U R Maturity’ (HTM) category M N UIII + IV- (V+VI+VII) A V- IX N r K ANBC V A K U A R M +VIII U M AT U R Mr V rK A + X V A T M T V M A U N A V A N V r KUthe purpose * For V AR sector of priority computationM etc. from NBC. U K only. Banks should not A R Udeduct / net anyM A like amount U N provisions, accrued interest, M Adjustments forAWeightsT in PSL Achievement r V K U A R V M A T M r V M Aregional disparitiesUinNthe flow of priorityAsector V credit at the district A Tto Udistricts on the basisAofRper capita credit U N V RU To address level, it was decided K Mto priority sector and M A for U N r rank M comparatively higher V T flow of priority sector districts with comparatively K flow r credit. With effectTfrom lower flow of A build an incentive framework V FY 2024-25, a higher credit and a dis-incentive framework for Uweight (125%) AR districts with A M r K A V to the incremental shall be assigned N priority sector creditA V M where the creditAflowT V in the identified districts UM priority is comparatively U PSL less thanM Rcredit lower (per capita A and a lower weight ~9,000), U Nflow(90%) will be assignedVhigher for r K incremental V A sector U in the identified districts where the R credit is M comparatively A U N than ~42,000). TheK list of both categories A of districts is given in U R M IB and will be validATup to FY 2026-27.MThe (per capita PSL greater r districts other than V K Annexes IA and A V A T those M r T V M Awill continue to haveU Nexisting weightageAofV100%. A Mentioned N V r KU V AR K U M A R U M A U N M DESCRIPTIONAOFT ELIGIBLE CATEGORIES r UNDER PRIORITY V SECTOR r KU A R V M A T M V M A U N V A T AGRICULTURE R sector will include UThe lending to agriculture A N V r K V A K M UActivities), A RU U M A M I. A T InfrastructureMr Farm Credit (Agriculture and Allied V K V II. Agriculture T r III. A Ancillary Activities N M U A VA N M r V AR Farmers: KUM KI. UFarm Credit Individual A R U M A T M r V A V N V AT U M R U MA K A U Mr A T V M r K V Mr V K A U M R U T Mr V rK VA A VA A T M T M UN A V UN A K U A R UM R M AV U N Mr A TV M r K VA K U A R V (JLGs) i.e. groups Loans to individual farmers [including Self T Help Groups (SHGs) r or Joint Liability Groups V M A U N A VA of individual farmers, provided banks maintain N M disaggregated A Tdata V This N of K U A R viz. dairy, fishery, such loans] U M and Proprietorship firms U bee-keeping and of farmers, directly R engaged in Agriculture A and Allied Mr V include: Activities, K animal husbandry, poultry, A U M sericulture. R U T will A i. Crop r V M loans for traditional/non-traditional T r K horticultureVandA A V loans including Nand long-term loans A plantations, Vfor agriculture andNalliedMactivities (e.g.Vpurchase T of M allied R U activities. A A KU implements M U A activities). UN ii. Medium r V Aagricultural K U R and machinery and developmental A M loans for allied M A T transporting M iii. Loans for pre and r own farm produce V post-harvest activities K U grading andAR viz. spraying, harvesting, V iv. Loans toNdistressed farmers indebted AT to non-institutional r V of their A V M lenders. A T U M R v. Loans Uunder the Kisan Credit M Afarmers Card Scheme. U Nof land for agricultural V r K V vi. ALoans against pledge/hypothecation Loans to small and U marginal for R purchase M A purposes. U N K of A U up to ₹Rs. 75 lakhAR M A T receipts) for M vii. r not exceedingT12Vmonths subject toraKlimit agricultural produce (including warehouse A V against N a period NWRs/eNWRs and up toA M T V AV ₹Rs. 50 lakh against warehouse receipts other than M R U N V A K U viii. A U M R U Loans to farmers for installation of stand-alone Solar Agriculture A NWRs/eNWRs. N M r V solarisation of gridK connected AgricultureA U M Pumps and for R U A T ix. Loans to farmers M r for installation of TsolarVpower plants on barren/fallow Pumps. r K V A A V N V A M land or in stilt T M fashion U on agriculture R of Farmers engaged land A owned by farmer. N V A KU UM in Agriculture andU Corporate Farmers, FPO/FPC of Individual Farmers, Partnership Firms A and Co- r V A Operatives R Allied Activities M U N M T per borrowingMentity: a. Loans for the following r K V A activities will be subject K to an aggregate U limit of Rs. 2 crore A R V A T r V M A i. N U Crop loans to farmers A VA and which will include loans forN M traditional/non-traditional V A T K U A Rii. Medium andUlong-term M plantations and horticulture R U allied activities. and allied A N r V and machineryUand developmental RU M loans for agriculture activities (e.g. M purchase K A AT iii. loans r allied activities). T V r K harvesting, Tgrading A of agricultural implements V M for A M V M A U Nand transporting ofAtheir Loans for pre and V own farm produce. post-harvest activities viz. spraying, A U b. A R M U N V A produce UN r K V Ureceipts) for a period R not exceedingU12Mmonths Loans up to Rs.₹75 lakh against pledge/hypothecation of agricultural K A against R M A T NWRs/eNWRs (including warehouse M rand up to Rs. 50Tlakh V against warehouse K A V A r receipts M undertaking farming other V than T with M A N NWRs/eNWRs. U up to Rs. 5 crore perA V A R marketing ofUtheir N V KU M produce at a pre-determined U A c. Loans borrowing entity to FPOs/FPCs r V Aassured R price. M U N M II. Agriculture T silos) including i) Loans for K rcold storage units/cold construction of storage A Vstorage chains designed facilities (warehouse, K market Uto store agricultureAR yards, godowns and V A M T r V irrespective ofAtheir location. Infrastructure A N produce/products, V M A T U M R U M A development.UN V A ii) Soil conservation and watershed r K iii) A V Plant tissue culture U and agri-biotechnology, R seed production,UM production of bio- U N M K A R AT iv) Loans for construction r of oil extraction/ Vprocessing units rforKproduction of bio-fuels, A pesticides, bio-fertilizer, and vermi composting. V M A T M V M A their U N storage and distribution up Compressed BioA V infrastructure Gas (CBG) plants. N along with loans to A entrepreneursT for Rabove loans, an aggregate V KU M sanction limitRofUTS. 100 Crore perMfrom A the banking UN setting ForA U r V the K M III. Ancillary AT i) Loans up toMRs.r 5 crore to co-operative A V societies of farmers Ufor purchase of theAR V system, will apply. T r K V A produceN V A M T A and M Service Uup to Rs. 50 croreMtoAStart-ups, as per definition of members. U R ii) Loans U N of Ministry of A V Commerce r K V AIndustry, Govt. of India K U that are engaged A in R M limit of Rs. 100 agriculture and allied services. M A T iii) Loans for Food rand Agro-processing V up to an K U aggregate sanctioned V M crore per borrower from the banking A Tsystem. M rwith M A iv) U Nsector shortfall. AV Outstanding deposits under RIDF and other eligible funds NABARD on account R N KU M U centres. of priority v) A Loans for setting up U R M r T V rK of Agri-clinics and Agri-business V A V A M AT M A U N V K U A R U MA Mr A T V M r K V Mr V K A U M R U T Mr V rK VA A VA A T M T M UN A V UN A K U A R UM R AV M U N Mr ATV r M K VA K U or organizationsAR V vi) Loans to Custom Service Units managed T r by individuals, institutions A bulldozers, well-boring M T V M A who maintainN V a fleet of tractors, U etc., and undertake A farm work for farmers on contract basis.VA equipment, threshers, U vii) A R combines, M U N A Service UN r K V U R Bank loans to Primary Agricultural Credit Societies (PACS), Farmers’ K A M for on- R M T Societies (FSS) and A viii) Loans sanctioned r Large-sized V Adivasi Multi-Purpose K U Societies (LAMPS) A V lending to M by banks to MFIs agriculture. A T for on-lending toMagriculture r V M A U N specified in paragraph V 21 of these Master sector A as Tper the R sanctioned byUbanks A N V KU M to registered NBFCs U(other than MFIs)MasAper conditions UN conditions Directions. ix) A r V Loans K 22 of these Master R ADirections. KU R M A T specified in paragraph M r V A V T r Asub-target, Small andMMarginal FarmersAwillT V A U N V UMthe followin

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