RBI panel for retaining priority sector target at 40%

A Reserve Bank panel on priority sector lending today recommended retaining the existing 40% ceiling for the segment while creating a sub-head of micro enterprises within the micro and small enterprise (MSE) sector.

Besides, the panel headed by Union Bank of India Chairman and Managing Director MV Nair, also suggested raising education loan ceiling by Rs 5 lakh for students, under priority sector.

The committee also recommended increasing the priority sector target for foreign banks from existing 32% to 40% of total advances, on par with the domestic banks.

The target for foreign banks would include sub-targets of 15% for exports and 15% for MSE sector, within which 7% may be earmarked for micro enterprises.

"Limit under priority sector for loans for studies in India may be increased to Rs 15 lakh and Rs 25 lakh in case of studies abroad, from existing limit of Rs 10 lakh and Rs 20 lakh, respectively," the panel said in its report submitted to the RBI.

The report said, "target of domestic Scheduled Commercial Banks (SCBs) for lending to priority sector is retained at 40% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposure (CEOBE), whichever is higher".

The old classification of distinction between direct and indirect agriculture credit has been done away with by converting the segment into a composite one called agriculture and allied activities.