The banking regulator, Reserve Bank of India (RBI), has relaxed the direct and indirect farm lending targets to be achieved by banks this fiscal. The priority sector lending goals have been relaxed and have been set at 13.5 percent and 4.5 percent for direct farm lending and indirect farm lending respectively.
According to the new norms, loans till the amounts of Rs. 2 crore per loan application to firms like farmer producer firms, partnership companies and co-operatives formed by farmers employed in agricultural and related activities, have to be classified under direct farm lending.
But, only those loans which have been taken for raising crops together with loans taken for traditional/non-traditional plantations, horticulture and related activities and for activities carried out before and after the harvest period such as grading, sorting, harvesting, spraying and weeding, will be considered as direct farm lending.
In addition to this, the above classification of direct farm lending, will be applicable to only medium and long term advances.
The apex bank has also asked banks to see to it that loans provided as priority sector loans are for permitted purposes only and to constantly monitor the end use of such loans.