BANKS WANT FARM TARGETS DELINKED FROM INFRA LOANS

During their post-credit policy meeting with Reserve Bank of India officials on Friday, bankers demanded that they be exempted from setting aside funds for agricultural lending as a condition for incremental loan flow to infrastructure projects.


With bank loan growth hitting the lowest level in a decade, lenders are banking on the infrastructure sector to drive credit flow. The Planning Commisison has estimated $500 billion (Rs 23.5 lakh crore) investment for roads, ports, power and railway between 2007 and 2012. While overall year-on-year loan growth was around 14 per cent till the middle of January, growth in credit for infrastructure projects was 42 per cent. At the end of January, core sector loans accounted for 9.3 per cent of the banks’ total advances. Banks have indicated a huge pipeline of undisbursed loans till the end of December. While State Bank of India (SBI) has indicated that the gap between sanctions and disbursement is about Rs 50,000 crore, Bank of Baroda and Bank of India have Rs 30,000-Rs 35,000 crore in the sanction pipeline. Union Bank of India has over Rs 20,000 crore of undisbursed loans.


With most sanctioned loans meant for the infrastructure sector, banks have been requesting the central bank to relax the rules on single borrower and group exposure limits. However, RBI has declined, saying exposure limits are already high compared with global standards.


Source: http://www.business-standard.com/india/news/banks-want-farm-targets-delinkedinfra-loans/384302/