Jan Dhan overdraft eligible for priority sector lending: RBI

Overdraft facilities extended under the Pradhan Mantri Jan Dhan Yojana (PMJDY) will qualify as priority sector lending, the Reserve Bank of India (RBI) has notified.

“It has been decided that overdrafts extended by banks up to Rs 5,000 in PMJDY accounts will be eligible for classification under priority sector advances (‘others’ category),” RBI said.

However, for this, the borrower’s household annual income should not exceed Rs 60,000 in rural areas and Rs 1,20,000 in non-rural areas.

This will also help banks in achieving the mandatory priority sector lending (PSL) targets. Currently, under PSL obligation, banks are required to lend 40 per cent of their adjusted net bank credit of the previous year to sectors such as agriculture, micro and small enterprise, housing and education, among others. Of the 40 per cent, 18 per cent is the target for agriculture, of which 13.5 per cent needs to be for direct agriculture.

If a bank fails to meet its target, it invests in low-yielding assets like funds with National Bank of Agricultural and Rural Development’s Rural Infrastructure Development Fund.

RBI is also reviewing the PSL targets and is set to revise the norms and broaden the definition of what constitutes PSL now. Banks have asked that sectors like infrastructure, food processing etc should be included under the ambit of PSL.