Banks wanted to do away with 40% priority sector target

During its interactions with banks, the M V Nair Committee, set up to review priority sector norms, found most wanted to do away with the 40 per cent priority sector lending obligation.

"Most banks, including public sector banks, wanted the removal of the overall target of 40 per cent," said a banker, requesting anonymity. "Instead, these suggested imposing sector-wise targets, which would be easier to achieve."

However, keeping the government’s financial inclusion programme in mind, no such change was included in the report, the official added. A number of reports submitted earlier had made similar suggestions, but these, too, never saw the light of day.

The report submitted on Tuesday has retained the overall priority sector target at 40 per cent adjusted net bank credit (ANBC). In fact, the target has been extended to foreign lenders, with suggestions on securitisation, on-lending and priority sector lending certificates.

"Also, multiplicity of targets and sub-targets was creating a lot of confusion," the official said. The committee also recommended withdrawing the distinction between direct and indirect agricultural lending. Instead, it suggested half the loans in the category should be given to small and marginal farmers. Currently, such loans stand at six per cent of ANBC, which needs to be increased to nine per cent in stages till 2015-16.