New norms for
priority sector
Draft moots adjusted net bank credit
Special Correspondent
CHENNAI: The Reserve Bank of
India (RBI) on Wednesday
came out with the much-
awaited revised draft guide-
lines for lending by banks to
the priority sector.
The draft proposes that the
priority sector lending target
and sub-targets be linked to
Adjusted Net Bank Credit or
ANBC (that is, Net Bank
Credit plus investments
made by banks in non-SLR
bonds in the held-to-maturi-
ty category or credit equiv-
alent of off-balance-sheet
exposures, whichever is high-
er (as distinct from the con-
cept of Net Bank Credit
applied so far).
The draft guidelines say
that the priority sector will
broadly comprise agriculture,
small scale industries, small
business/service enterprises,
micro credit, educational
loans and housing loans and
revises definition of small and
micro sectors in terms of the
new law governing SMEs. The
total (minimum) exposure to
priority sector lending shall
remain at 40 per cent (of
ANBC).
To encourage banks to lend
directly to the priority sector,
the banks’ deposits placed
with NABARD/SIDBI against
shortfall in their obligations
would not be eligible for clas-
sification as indirect finance
to agriculture/small scale in-
dustry (respectively in the
case of Indian and foreign
banks).
Foreign banks
In the case of foreign
banks, 50 per cent of the cor-
pus of the proposed Small En-
terprises Development Fund
will be from shortfall in lend-
ing (against total obligation of
32 per cent) on a pro rata ba-
sis and 50 per cent from
shortfall in the case of lending
to SSI and export sectors.
The draft includes some
sub-sectoral targets for lend-
ing.