(MENAFN- KNN India) The Reserve Bank of India (RBI) has come out with a master directions for all banks on targets and classifications under Priority Sector Lending.
RBI, in the direction, asked the banks to ensure that loans extended under priority sector are for approved purposes and the end use is continuously monitored. The banks should put in place proper internal controls and systems in this regard.
The categories under priority sector are – Agriculture; Micro, Small and Medium Enterprises; Export Credit; Education; Housing; Social Infrastructure; Renewable Energy; and Others.
RBI further said that to ensure that MSMEs do not remain small and medium units merely to remain eligible for priority sector status; the MSME units will continue to enjoy the priority sector lending status up to three years after they grow out of the MSME category concerned.
On common guidelines for priority sector loans, the apex bank’s master direction said, “A register/ electronic record should be maintained by the bank, wherein the date of receipt, sanction/rejection/disbursement with reasons thereof, etc., should be recorded. The register/electronic record should be made available to all inspecting agencies.”
It said that the banks should also provide acknowledgement for loan applications received under priority sector loans. Bank Boards should prescribe a time limit within which the bank communicates its decision in writing to the applicants.
Detailing on eligible activities for the priority sector lending, RBI highlighted the targets and sub-targets set under priority sector lending for all scheduled commercial banks operating in India.
With regard to the Foreign Banks with less than 20 branches, for total priority sector, RBI said that 40 per cent of Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher; to be achieved in a phased manner by 2020.
The computation of priority sector targets/sub-targets achievement will be based on the ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposures, whichever is higher, as on the corresponding date of the preceding year.
For the purpose of priority sector lending, ANBC denotes the outstanding Bank Credit in India [As prescribed in item No.VI of Form ‘A’ under Section 42 (2) of the RBI Act, 1934] minus bills rediscounted with RBI and other approved Financial Institutions plus permitted non SLR bonds/debentures under Held to Maturity (HTM) category plus other investments eligible to be treated as part of priority sector lending (e.g. investments in securitised assets).
The outstanding deposits under RIDF and other funds with NABARD, NHB, SIDBI and MUDRA Ltd. in lieu of non-achievement of priority sector lending targets/sub-targets will form part of ANBC.
Advances extended in India against the incremental FCNR (B)/NRE deposits, qualifying for exemption from CRR/SLR requirements, as per the Reserve Bank’s circulars will be excluded from the ANBC for computation of priority sector lending targets, till their repayment.
The eligible amount for exemption on account of issuance of long-term bonds for infrastructure and affordable housing as per Reserve Bank’s circular will also be excluded from the ANBC for computation of priority sector lending targets. For the purpose of calculation of Credit Equivalent Amount of Off-Balance Sheet Exposures, banks may be guided by the Master Circular on Exposure Norms issued by our Department of Banking Regulation. (KNN Bureau)