Mumbai: The new priority lending norms issued by the Reserve Bank will ensure a 40 percent increase in credit flow to the under-funded segment of small and marginal farmers at Rs 85,000 crore this fiscal, the economic research department of SBI said Tuesday.
Under the priority lending norms, it wants banks to lend 7 percent of their total advances to small and marginal farmers.
"As per our estimates, if banks have to meet the 7 percent target by March 2016, an amount of Rs 85,000 crore needs to go to the small and marginal farmers considering a credit growth of 15 percent in FY 2016, which will be 40 percent more than last fiscal's." it said in a note.
In the revised guidelines on the priority sector lending (PSL) made effective last week, the Reserve Bank has asked for a staggered increase in credit to the small and marginal farmers under the mandatory credit outgo to weaker sections of the society.
The small and marginal farmers is a newly-introduced segment which will be a part of the overall 18 percent credit allocation for agriculture. The RBI has dispensed away with the earlier distinction between direct and indirect lending.
"A target of 8 percent of annual net bank credit or credit equivalent amount of off-balance sheet exposure, whichever is higher, has been prescribed for small and marginal farmers within agriculture, to be achieved in a phased manner i.E., 7 percent by March 2016 and 8 percent by March 2017," the RBI said in its new PSL guidelines last week.