Foreign banks should lend to agriculture sector, weaker sections: Parliament panel

04 May 2007

Mumbai: A parliament committee has asked the government to make it mandatory for foreign banks to lend to agriculture sector and weaker sections of the society as part of the priority sector lending target.

"Guidelines should be issued to direct foreign banks also for lending under agricultural advances and to weaker sections," the Committee on Welfare of Scheduled Castes and Scheduled Tribes said in its report tabled in Parliament.

At present, domestic banks are required to allocate ten per cent of their advances for priority sector as defined by the Reserve Bank of India (RBI) and lending to weaker sections and 18 per cent to the agriculture sector.

The RBI has recently revised the guidelines on priority sector lending based on the recommendations of an internal working group, headed by C.S. Murthy.

Foreign banks are exempt from any such obligation. However, they are required to allocate 12 per cent of their funds under priority sector lending to companies for export promotion, from which domestic banks are exempt.

While domestic banks are required to allocate 40 per cent of their total advances to priority sector foreign banks are required to earmark only 32 per cent of their net advances.