Page 178 - DMGT303_BANKING_AND_INSURANCE

Unit 9: Priority Sector Lending

9. Loans to the software industry (having credit limit not exceeding Rs. 1 crore from Notes
the banking system).
10. Loans to specified industries in the food and agro-processing sector having
investment in plant and machinery up to Rs. 5 crore.
11. Investment by banks in venture capital (venture capital funds/companies registered
with SEBI).
4. What constitutes 'Direct Finance' for Agricultural Purposes?
Ans. Direct Agricultural advances denote advances given by banks directly to farmers for
agricultural purposes. These include short-term loans for raising crops i.e. for crop loans.
In addition, advances up to Rs. 5 lakh to farmers against pledge/hypothecation of
agricultural produce (including warehouse receipts) for a period not exceeding 12 months,
where the farmers were given crop loans for raising the produce, provided the borrowers
draw credit from one bank. The sub-target for direct agriculture advances is 13.5% of the
NBC.
Direct finance also includes medium and long-term loans (Provided directly to farmers
for financing production and development needs) such as Purchase of agricultural
implements and machinery, Development of irrigation potential, Reclamation and Land
Development Schemes, Construction of farm buildings and structures, etc. Other types of
direct finance to farmers include loans to plantations, development of allied activities
such as fishery, poultry etc. and also establishment of bio-gas plants, purchase of land for
agricultural purposes by small and marginal farmers and loans to agri-clinics and agri-
business centres.
5. What constitutes 'Indirect Finance' to Agriculture?
Ans. Indirect finance denotes to finance provided by banks to farmers indirectly, i.e., through
other agencies. Sub-target for indirect agriculture advances is 4.5% of NBC. Important
items included under indirect finance to agriculture are as under:

(i) Credit for financing the distribution of fertilisers, pesticides, seeds, etc.
(ii) Loans up to Rs. 40 lakhs granted for financing distribution of inputs for the allied
activities such as cattle feed, poultry feed, etc.

(iii) Loans to Electricity Boards for reimbursing the expenditure already incurred by
them for providing low tension connection from step-down point to individual
farmers for energizing their wells.
(iv) Loans to State Electricity Boards for Systems Improvement Scheme under Special
Project Agriculture (SI-SPA).

(v) Deposits held by the banks in Rural Infrastructure Development Fund (RIDF)
maintained with NABARD.
(vi) Subscription to bonds issued by Rural Electrification Corporation (REC) exclusively
for financing pump-set energisation programme in rural and semi-urban areas and
also for financing System Improvement Programme (SI-SPA).

(vii) Subscriptions to bonds issued by NABARD with the objective of financing
agriculture/allied activities.
(viii) Loans to farmers through PACS, FSS and LAMPS.

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