Before examining the question let us examine the
instructions available.
RBI issues separate Master circular for Priority Sector
lending – Targets and Classification in which priority sector lending includes
(i)
Farm Credit (which will include short-term
crop loans and medium/long-term credit to farmers)
(ii)
Agriculture Infrastructure and
(iii)
Ancillary Activities.
IRAC
norm circular of RBI specifies provisioning on standard asset as follows:-
a)
Farm
Credit to agricultural activities and Small and Micro Enterprises (SMEs)
sectors at 0.25 per cent;
Thus it can be noted that although
priority sector lending covers 3 categories however for provisioning purpose
the benefit of lower provision is available two category i.e Farm
Credit and SME.
The definition of Farm Credit has been
given in both the circulars separately but by and large remains same. I am not
copy pasteing the definition here but on analysis of the same you will observe
the key ingredients as
a)
Loan
should be given to Farmer AND
b)
Should
be directly for purpose of agriculture
or agriculture produce should be held as security (loans upto Rs 50 lacs).
As per internal ccirculars of Banks, Loans to Commission Agent/ Aarthi/ arthi have been classified as SME therefore they make provision of 0.25% on the same.
