A recent press report said that the Reserve Bank of India, in its recent notification has made it clear that banks that offer loan to farmers under the Kisan Credit Card will be treated as direct finance for agriculture under priority sector lending.
The RBI reports mentioned that the credit under the KCC is mainly for agricultural purposes. It also said that as per the regulations, working capital and term loans for financing production and investment requirements for agriculture and allied activities are treated as direct finance to agriculture under priority sector.
Reports said that this is likely to offer banks a chance to achieve its target for direct lending to agriculture, which is 14.5 per cent of total advances. It also mentioned that the total target for agri lending is 18 per cent of total advances.
The Reserve Bank of India (RBI) is the central banking institution of India and controls the monetary policy of the rupee as well as US$300.21 billion (2010) of currency reserves. The institution was established on 1 April 1935 during the British Raj in accordance with the provisions of the Reserve Bank of India Act, 1934. In its effort to control inflation it has hiked lending rates 12 times since March, 2010. The hike has made auto loan, home loan and other loans more expensive.