FM Dreaming of Huge Disbursement For Agriculture

Banks to disburse Rs 6 lakh cr agri loan in FY13

T E Narasimhan / Karaikudi Aug 26, 2012, 00:22 IST ( news collected form Business Standard ) http://www.business-standard.com/india/news/banks-to-disburse-rs-6-lakh-cr-agri-loan-in-fy13/484457/  Public sector banks have now set a target to disburse Rs 6 lakh crore agriculture loan during the current fiscal. This is Rs 25,000 crore higher than the earlier target. Inaugurating a new Rural Training Centre at Amaravathipuram, Karaikudi, being set up by the Indian Bank, Indian Overseas Bank and NABARD, Finance Minister P Chidambaram said that in 2011-12, agriculture loan target was Rs 4.50 lakh crore, and Rs 4.75 lakh crore was disbursed. For 2012-13, the target was set at Rs 5.75 lakh crore. “Last week, I met the chairmen of public sector banks, and they said would disburse Rs 6 lakh crore in 2012-13 at 7 per cent rate of interest,” said Chidambaram. He added, the interest rate will come down to four per cent for farmers who pay the loan and interest on time. He further said farmers should look at non-farming activities to boost their income, considering the fact that they can’t depend on agriculture due to uncertainty of rains. M Narendra, chairman and managing director of Indian Overseas Bank, said the banks would be focusing on non-farming activities as well. In a move to increase the productivity of agriculture in Tamil Nadu, the public sector banks have set a target to increase their lending to the agriculture sector by almost 41 per cent to Rs 51,000 crore. The significant jump is mainly due to increase in investment credit for the farmers. Of the total disbursement, 60 per cent will go towards crop loan. Last year, the investment credit disbursed by banks was around Rs 3,000 crore, and this year we are looking at around Rs 25,000 crore. So far, the banks were not focusing much on certain types of loans, including combined harvesting, cold storage, godowns, warehousing and others. According to SLBC data, around 77 lakh of the 82 lakh farmers using Kisan Credit Cards, availed of banking credits. This year the banks would cover around 20 lakh, including five lakh repeat finance under KCC. Banks can cut non-performing assets by helping medium and small enterprises: IIM-Indore BY  Ashish Gaur INDORE: Banking industry in the country can minimize its non-performing assets (NPA) and increase their profits if they help medium and small enterprises (MSME) build their capacities and MSMEs adopt best management practices. This was revealed in a value proposition model for various banks, which are risking their profitability due to loan lending rules to MSMEs, developed by the Indian Institute of Management, Indore (IIM-I).  The model suggests that if banks share their experiences such as core banking, retail marketing, inform MSMEs about government incentives and financing opportunities, training and development, international expansion, project planning and implementation experiences etc with the industries it can help them overcoming the increasing number of NPAs and simultaneously help MSMEs fighting their problem areas.  Prashant Salwan, a faculty member at IIM-I who did the research, told TOI, "Major factor which reduces the profits of Indian banks relates to the policies of the government. The lending rules for MSMEs increased the non performing assets (NPAs) as MSMEs did not adopt the best management practices and there was no strategic planning."  He said, "If banks co-create intangible resources such as customer relations with corporate, information technology implementation and best management practices dissemination, they can reduce risks and NPAs, increase profits and help MSMEs to be contemporary, thus creating value through partnership." The study that was recently published in the Indian Journal of Industrial Relationships has stated that Indian economy has immense opportunities for the manufacturing industry and its sub-segments. Unlike, MSMEs, some of the leading banks have capitalized on the opportunities with a lot of vigor, long-term planning and investing huge amount of capital in developing operation efficiency and competencies. The study undertook functioning of six Indian banks and two international banks to come to a conclusion. "MSMEs have realized that they cannot grow until and unless they develop internal recourses as well as have market strengths. Banks should leverage their strengths by giving extra value to SMEs so that the risks are reduced and banks become partner in SMEs growth," said Salwan. Earlier banks used to just lend the money and take collateral, now they need to share their strengths by redefining the value proposition to remain profitable, he said. Tips to profit Giving assistance to MSMEs in building capabilities Customized products to SMEs Share project planning experience Help in development of IT Share retail marketing experience Help in training and development of MSMEs http://timesofindia.indiatimes.com/business/india-business/Banks-can-cut-non-performing-assets-by-helping-medium-and-small-enterprises-IIM-Indore/articleshow/15690146.cms