The Reserve Bank of India has made it a tad easier for banks to meet the priority sector lending norms in the agriculture sector.
Loans up to an aggregate limit of Rs 2 crore per borrower to corporates, including farmer producer companies, partnership firms and co-operatives of farmers directly engaged in agriculture and allied activities, will be classified as direct agriculture lending.
However, this classification will apply only if the loans are for raising crops, including traditional/non-traditional plantations, horticulture and allied activities and for pre-harvest and post-harvest activities (spraying, weeding, harvesting, grading and sorting).
Further, the direct lending classification will apply to medium- and long-term loans taken for agriculture and allied activities and export credit given for exporting own farm produce.
INDIRECT FINANCE
If the aggregate loan limit per borrower is more than Rs 2 crore in the above cases, then the entire loan will be treated as indirect finance to agriculture, said the RBI.
The direct and indirect agriculture lending targets for banks are set at 13.5 per cent and 4.5 per cent, respectively, of the adjusted net bank credit (ANBC) obtaining as of March-end of the previous year.
Banks lending to agriculture, micro and small enterprises (MSEs), export credit and weaker sections of society are classified as priority sector lending. The overall target for priority sector lending for banks is set at 40 per cent of ANBC.
Bank loans to any government agency for construction of dwelling units or for slum clearance and rehabilitation of slum dwellers subject to a ceiling of Rs 10 lakh per dwelling unit will be considered priority sector lending.
Loans sanctioned by banks for housing projects exclusively for the economically weaker sections and low-income groups, the total cost of which does not exceed Rs 10 lakh per dwelling unit, will also qualify for priority sector status.
For identifying the economically weaker sections and low-income groups, the family income limit of Rs 1,20,000 per annum, irrespective of location, has been prescribed.
HFC
The eligibility under priority sector loans to housing finance companies is restricted to five per cent of the individual bank’s total priority sector lending, on an ongoing basis. The maturity of bank loans should be co-terminus with average maturity of loans extended by housing finance companies (HFCs).
The RBI said banks should ensure that loans extended under priority sector are for approved purposes and the end use is continuously monitored.
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