A recent press report said that Corporation Bank has planned to focus on direct lending to farmers during the current financial year. Mr. Ramnath Pradeep, Chairman and Managing Director, Corporation Bank, told the press that the bank will substantially improve lending to agriculture this year in order to save significant amount which is required to be deposited with Nabard (National Bank for Agriculture and Rural Development).
He added saying that the bank was incurring a loss of Rs 500 crore on account of this. The bank is paying its depositors an interest rate of 9.5 per cent while the amount deposited with Nabard will earn only 4 per cent therefore the bank will face a loss of 5.5 percentage points.
The Reserve bank of India has said that 40 per cent of a bank’s total lending should be to the priority sector comprising agriculture, horticulture, dairy activities, and micro and small enterprises. Lending to agricultural activities must account for 18 per cent of the 40 per cent. In case banks fail to achieve this target by end of each financial year, the bank will have to deposit an amount with Nabard which pays nominal interest, depending upon the shortfall.
Earlier, the bank used to lend to mill-owners, but now the bank will directly open accounts for farmers as this is considered as direct lending to agricultural sector. The other loans offered by the bank are home loans, personal loan, car loan, educational loan etc.