Saturday, July 21, 2012

Priority Sector Lendings - Revised Guidelines

The highlights of the revised priority sector guidelines are:
  • Overall target under priority sector is retained at 40 per cent as suggested by Nair Committee.
  • The targets for both direct and indirect agricultural lending are kept unchanged at 13.5 per cent and 4.5 per cent of Adjusted Net Bank Credit, respectively.
  • The following important activities, among others, form part of priority sector lending as per the revised guidelines:
    • Loans to Micro and Small Service enterprises up-to 1 crore and all loans to Micro and Small manufacturing enterprises
    • Loans upto 25 lakh for housing in metropolitan centres of population above 10 lakh and 15 lakh at other centres.
    • Loans to Food and Agro processing units.
    • Loans to individuals for educational purposes including for vocational courses upto 10 lakh in India and 20 lakh abroad.
    • Loans for housing projects exclusively for economically weaker sections and low income groups, provided the cost does not exceed `5 lakh per dwelling unit.
    • Loans to distressed farmers indebted to non institutional lenders.
    • Overdrafts upto 50000/- in No-Frills account.
    • Loans to State Sponsored Organisations for scheduled castes and scheduled tribes.
    • Loans to individuals for setting up of off-grid solar and other off-grid renewable energy solutions for households.
    • Loans to individuals other than farmers upto 50000/- to prepay their debt to non- institutional lenders.
  • Foreign banks having 20 or more branches in the country will be brought on par with domestic banks for priority sector targets in a phased manner over a maximum period of 5 years starting April 1, 2013. They will be required to submit an action plan for achieving the targets over a specific time frame to be approved by RBI.
  • The foreign banks with less than 20 branches will have no sub targets within the overall priority sector lending target of 32 per cent. This is expected to allow them to lend as per their core competence to any priority sector category.
  • Bank loans to Primary Agricultural Credit Societies (PACS), Farmers' Service Societies (FSS) & Large Adivasi Multi-Purpose Co-operative Societies (LAMPS) ceded to or managed/controlled by such banks for on-lending to farmers for agricultural and allied activities are included under direct agriculture.
  • Investments by banks in securitised assets, outright purchases of loans and assignments to be eligible for classification under priority sector provided the underlying assets qualify for priority sector treatment and the interest rate charged to the ultimate borrower by the originating entity does not exceed Base Rate of such bank plus 8 per cent per annum.

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