RBI revises priority sector lending norms for banks

Mumbai: The Reserve Bank of India (RBI) has revised the lending norms for priority sector, allowing banks to include direct finance to corporates for agriculture and allied activity of up to Rs1 crore as priority sector (PSL) exposure as against the earlier limit of Rs20 lakh.

Home loans up to Rs20 lakh (excluding loans granted to by banks to their own employees), will also now qualify to be classified under priority sector advances compared to the earlier limit of Rs15 lakh.

Besides, loans given for repairs to damaged houses of families up to Rs1 lakh in rural and semi-urban areas and up to Rs2 lakh in urban and metropolitan areas would also be included as priority sector advances, it said.

The central bank, while maintaining the overall priority sector lending limit to 40 per cent, has also increased the lending cap for educational loans to Rs10 lakh for studies in India and Rs20 lakh for studies abroad. Earlier, the limits were Rs7.5 lakh and Rs15 lakh respectively.

"Only those sectors which are employment-intensive such as agriculture, and tiny and small enterprises should be eligible for inclusion under the priority sector," the RBI said.
The targets for PSL will be linked to adjusted net bank credit (ANBC) or credit equivalent amount of off-balance sheet exposures (OBE), whichever is higher, at the end of the previous financial year (March 31). The outstanding NRI deposits (FCNR (B) and NRNR) will not be deducted for computing obligation for priority sector lending.

The existing investments by banks in non-SLR bonds in the held to maturity (HTM) category will not be considered for calculating ANBC up to March 31, 2010. However, fresh investments by banks in non-SLR bonds (held in HTM category) will be counted for determine PSL targets.

The outstanding deposits placed with NABARD/SIDBI by banks for not meeting PSL norms for agri and SME sector will be eligible for classification as indirect finance (under PSL) up to March 2010 only. Fresh deposits will not enjoy this categorisation, RBI said.

NRI deposits such as FCNR (B) and NRNR deposits balances will no longer be deducted for computation of adjusted net bank credit (ANBC) for priority sector lending purpose.

The revised norms will be effective with immediate effect, RBI said.

Any bank which has difficulty in complying with the revised guidelines may approach the central bank with appropriate reasons and time frame for compliance, it said.