Public sector lender Corporation Bank has said that it would be focusing on directly lending to farmers in this fiscal. The bank has been unable to meet priority lending requirements for the fiscal last ended.
According to Mr Ramnath Pradeep, CMD of Corporation Bank, the bank is aiming to increase its farm sector lending by large amounts in order to meet targets as well as save big chunk which needs to be deposited with NABARD.
"I am incurring a loss of Rs 500 crore on account of this. We are paying depositors an interest rate of 9.5 per cent while the amount deposited with Nabard will earn only 4 per cent," he said.
RBI has directed that all banks should lend 40% of their total loan book to priority sector. This comprises of agriculture, horticulture, dairy activities, and micro and small enterprises.
Agricultural lending has been directed to comprise of 18% out of the total 40%.
The RBI has recently declared that lending to Food Corporation of India, State Food Civil Supply, and Cooperative Federations will not be considered to be priority sector lending.
Corporation Bank had lent Rs 3500 crore to these institutions. The guideline led it to fail in meeting priority sector lending requirements.