PSL norms for foreign banks: K C Chakrabarty dismisses criticism

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/psl-norms-for-foreign-banks-k-c-chakrabarty-dismisses-criticism/articleshow/16827709.cms

Dismissing criticism of RBI's stance of treating foreign banks at par with domestic peers with regard to priority sector lending, RBI Deputy Governor K C Chakrabarty today said overseas lenders who have been in India for over a hundred years should not complain about this issue. 

Speaking at a banking summit at Mumbai, he also responded to criticism in the western press that foreign banks now have to track the prices of ploughs and livestock to do business India. 

A passionate votary of the financial inclusion, Chakrabarty said till the banks come to know the prices of these two products associated with the rural areas, they will have to comply with the PSL (priority sector lending) norms. 

Under PSL norms, certain percentage of overall loans should be to sectors like agriculture. 

Under the revised norms, foreign banks with over 20 branches are considered on par with domestic lenders, and have to allocate 40 per cent of annual lending to the priority sector. 

The PSL target of smaller foreign banks has been maintained at 32 per cent. 

Among the 40-odd multinational banks in the country, only three -- Standard Chartered, Citi, and HSBC -- have more than 20 branches each. 

"If banks say they believe in empowering the social sector, the results should be visible in PSL compliance," Chakrabarty said, speaking at a summit organised by the Financial Times and Yes Bank. 

Replying to a question, he said RBI is also against financial sector companies indulging in real sector activities and asked for `a Chinese wall', by way of opening subsidiaries. 

The leverage ratios of a real sector company is twice the capital employed while the same for a financial company can go up to ten times, so it is essential that financial companies do not "muddle" in real sector, he said.