The Reserve Bank of India has rewritten the guidelines of lending to the priority sector, regarding loans to medium enterprises, sanitation and renewable energy sectors which come under one roof. “The target for lending to the redefined priority sector is retained uniformly at 40 percent of adjusted net bank credit or credit equivalent of off-balance sheet exposure, whichever is higher, for all scheduled commercial banks,” the RBI said in a notification. Foreign banks will however be given time to comply with the revised norms, the central bank added, without specifying time period. 

The target for lending to the agriculture sector has been kept at usual 18 percent of ANBC, but the Reserve Bank has recommended a sub-target of 8 percent of ANBC for small and marginal farmers, to be achieved in a phased manner. The RBI’s decision came a day after the government proposed changes to the priority sector lending norms.

Macquarie Research termed the priority sector recommendations as “very onerous especially for private banks” and added, although agriculture's contribution to the gross domestic product (GDP) had decreased, the priority sector lending norms are not reflecting the changing requirements and suggested that the infrastructure sector has to be brought under the umbrella of priority sector lending.

By Premji