Need to raise farm sector’s credit absorption capacity: Mundra

Mumbai, Aug 16 (PTI) Reserve Bank Deputy Governor S SMundra today called for increasing the credit absorptioncapacity of the farm sector to make agri-lending moresustainable. "In agriculture, there is a year-by-year increase intargets which are accepted and are being achieved. But I’dbelieve that there is a limit to it," he said at the annualFibac conference here. "Unless there is an improvement in the creditabsorption capacity of the farm sector, it (agri-lending)would be risky," he warned. It can be noted that every year, the government sets adirect agri-lending target for banks. The Narendra Modiadministration has set a target to double farm income by2022. Though typically farmers get crop loans of up to Rs 3lakh at 7 per cent interest, the effective rate for them isonly 4 per cent as the rest is subsidised by the government. The 2016-17 Budget had set a target to double farmersincome by 2022, and had allocated nearly Rs 36,000 crore forthe farm sector while raising agri-credit target to Rs 9trillion for this fiscal, from Rs 8.5 trillion in 2015-16. Banks are also supposed to ensure 42 per cent of theiroverall advances is towards priority sector lending (PSL). Asthe overall credit growth increases, the quantum of fundsgoing to the farm sector also goes up, Mundra said. He also said land reforms, investments, a fullecosystem which involves insurance schemes, value chain,distribution and supply can help in increasing the capacity ofagriculture sector to absorb credit. PTI AA HV BEN NRB ABMRDS