According to the guidelines of the Reserve Bank of India, it is mandatory for all the banks that out of the total lent amount by a bank, 40% must be lent under priority sector lending and out of that 40 percent at least 18 percent must be lent to agricultural activities.
All the banks are required to maintain the lending accounts as prescribed by the Central Bank otherwise banks have to deposit the difference in the amount with NABARD that pays interest as low as 4 percent. Corporation Bank is way short of the target and so it has planned to lend to the farmers directly for the current financial year to meet the targets.
The Chairman and managing Director of Corporation Bank Mr. Ramnath Prdeep said “We had reached a compliance level of 14 per cent (against a target of 18 per cent). But because of disqualification it has come down to 8 per cent.”
About depositing with NABARD, he said “I am incurring a loss of Rs 500 crore on account of this. We are paying depositors an interest rate of 9.5 per cent while the amount deposited with Nabard will earn only 4 per cent.”
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