RBI hikes priority sector loan limit for service sector MSEs by 150% to Rs5 crore

The Reserve Bank of India (RBI) today announced a 150 per cent increase in commercial banks' priority sector loan limit for micro and small enterprises (MSEs) in the service sector to Rs5 crore from the existing Rs2 crore.

RBI also increased the loan limit for dealers / sellers of fertilisers, pesticides, seeds, cattle feed, poultry feed, agricultural implements and other inputs, which are classified as indirect finance to agriculture, to Rs5 crore from the existing Rs1 crore per borrower.

For asset-backed lending, including loans against warehouse receipts that are classified as agricultural loans, the RBI has raised the ceiling on individual farmers and indirect agriculture loans in the case of corporates, partnership firms and institutions engaged in agriculture and allied activities to Rs50 lakh from the current Rs25 lakh.

RBI also introduced a credit monitoring system for banks based on the recommendations of the IBA committee headed by K R Kamath. 

The committee has suggested strengthening banks' existing systems of monitoring credit growth to the sector and put in place a system-driven comprehensive performance management information system (MIS) at every supervisory level (branch, region, zone, head office) which should be critically evaluated on a regular basis;

Besides, the committee has proposed a system of e-tracking of MSE loan applications and monitoring of loan application disposal process in banks, giving branch-wise, region-wise, zone-wise and state-wise positions.

RBI will provide a format for the purpose to banks as recommended by the sub-committee. Banks have to display the position in this regard on their websites.

Banks should also monitor timely rehabilitation of sick MSE units as suggested by the committee. RBI said it would issue detailed guidelines separately.