RBI revises priority sector lending norms, makes it applicable to foreign banks as well

The Reserve Bank of India (RBI) has revised the guidelines for lending to the priority sector, including loans to medium enterprises, sanitation and renewable energy sectors under the ambit of priority sector lending.

In addition to micro and small enterprises, medium enterprises are included within the ambit of priority sector lending, RBI said in a release.

To ensure that the micro enterprises are not crowded out, a sub-target of 7.5 per cent for micro enterprises has been included, which is to be achieved in a phased manner.

In addition, loans to sanitation, health care and drinking water facilities and renewable energy will come under the priority sector ambit, as will incremental loans made to exports, with certain ceilings, RBI said.

While RBI retained the overall target for lending to the redefined priority sector at 40 per cent of adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposure, whichever is higher, the new guidelines have also been made applicable to foreign banks.

Foreign banks will, however, be given time to comply with the revised norms, the RBI added, without specifying on a time period.

While the target for lending to the agriculture sector has been retained at 18 per cent of ANBC, the RBI has recommended a sub-target of 8 per cent of ANBC for small and marginal farmers, which is to be achieved in a phased manner.

A working group set up by the RBI, meanwhile, has recommended introduction of priority sector lending certificates (PSLCs), which will enable banks to meet their PSL requirements even while leveraging their comparative advantage in lending.

RBI said the new norms are in line with the structural changes in the Indian economy and that there was a need to reorient guidelines towards today's growth and inclusion agenda.