Agriculture loans have always been a matter of concern for the banks, specially public sector banks like State Bank of India, Punjab National Bank,IDBI Bank,et al who are mandated by the RBI to contribute to the priority sector. State Bank of India is the worst hit bank in the agri-sector NPAs.

The Agriculture sector have always contributed more to NPAs than the non-agri loans, apart from 2009-10, when the union government waived off farm loans worth Rs. 76,000 crore.

The banks have total agricultural loan books worth Rs. 5.1 trillion against Rs. 4.5 trillion a year ago. The Planning Commission has pegged agriculture sector's growth at 4% for the current 5 year plan, up from 3.3% in the 11th plan. Agriculture and allied sector provides employment to more than half of the country's population and contributes to 15% of the GDP.

"We cannot raise agricultural growth consistently to 4% per annum without a focus on research and agricultural credit in rain-fed areas. There is also need for more robust weather insurance and agricultural extension services to target diversified livelihood options in the rain-fed areas," Subbarao added.

Mr. Subbarao was also wary of some of the low cost farm credit being drifted to non-farm purposes. He also stated, "On visiting some States' bank branches, it was not clear that the credit being shown as lent to farmers was actually used for agriculture purposes."

Mr. Subbarao was present at the 30th anniversary of National Bank for Agricultural and Rural Development (Nabard).