New Delhi: The recent RBI circular regarding the revision of limits under the Priority Sector Lending (PSL) – Targets and Classification will boost Agriculture and Allied activities, according to Mr Piruz Khambatta, Chairman, CII National Food Processing Committee and Chairman & Managing Director, Rasna Pvt Ltd.
The enhanced credit flow will ease the availability of financial resources to the Agriculture sector, at the same time enable banks to reach out to the farmers and the MSMEs (engaged in Agri related activities), with an extended arm, he added.
According to Mr Khambatta, while Priority Sector Lending (PSL) is an institutional mechanism for allocating credit to Agriculture and MSMEs, there is a need to realise the high potential of food processing for generating employment and improving livelihood. Hence, it is suggested that all advances to agriculture and food processing under PSL, be enabled without any limitation on expenditure made on plant and machinery (capital expenditure), he added.
Earlier the RBI has issued a Circular to all scheduled commercial banks in the country stating that (i) The limit of loans to farmers against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months stands increased from Rs 25 lakh to Rs 50 lakh both under direct and indirect agriculture; and (ii) The limit of loans to dealers/sellers of fertilizers, pesticides, seeds, cattle feed, poultry feed, agricultural implements and other inputs has been raised to Rs 5 crore per borrower from Rs 1 crore.
It may be recalled that the Reserve Bank had constituted the Committee under the chairmanship of Shri. M. V. Nair on August 25, 2011 pursuant to the announcement made in the Monetary Policy Statement 2011-12. The Committee was to re-examine the existing classification and suggest revised guidelines with regard to priority sector lending and related issues.