RBI hikes priority sector lending target for foreign banks

The Reserve Bank of India (RBI) has upped the priority sector lending target for foreign banks with 20 branches or more to 40 per cent from 32 per cent in a phased manner over a maximum period of five years starting 1 April, 2013.

In a revision of guidelines on priority sector lending issued yesterday, the central bank said these lenders would have to submit an action plan for achievement of the target over a specific time frame that would be approved by the RBI.

State-run banks are required to target 40 per cent for the priority sector, which typically includes small value loans to farmers for agriculture and allied activities, loans to micro and small enterprises and other low income groups.

The three biggest foreign banks operating in India are Standard Chartered, HSBC and Citigroup.

Foreign banks with less than 20 branches would continue with the 32 per cent, they had, the RBI said.

Meanwhile, promoters of companies seeking loan restructuring may in future be required to give personal guarantees and make bigger financial sacrifices if they wanted the support of banks to get their businesses back on track.