Banks have been urged by the finance ministry to increase the limit on short term crop loans under Kisan credit card scheme by atleast two times. This idea by the finmin comes in line with its intention to raise agricultural credit.
Banks are however in a dicey situation in this regard because they fear a spurt in bad loans as these loans are collateral free ones.
A senior official of the ministry said, "We are not forcing banks." "They should do their due diligence as required. However, if there is a case they may ease the norms as applicable," he said.
The limit has already been raised to Rs 2 lakhs by the largest lender of the country, State Bank of India. "We've increased the limit for loans under kisan credit card scheme by . 1 lakh to provide further support to both small and medium scale farmers," a senior SBI official said.
The new guidelines suggest that banks would be lending upto Rs 2 lakh to farmers without taking collateral. This facility will however only be given to those farmers who have a clean record for the past three years.
"The government should look whether they are pushing farmers into a debt trap by easing norms. Already there have been issues with recovery of loans under the debt relief scheme," said the chairman of a south-based public sector bank.