You are here: Home » Economy & Policy » News
Business Standard

Tamil Nadu opposes provision in Master Directions for priority lending

CM Palaniswami says state seems to have been singled out for adverse treatment as all 32 districts (prior to bifurcation) have been categorised as having comparatively high flow of priority credit

Priority sector lending | Tamil Nadu | Tamil Nadu government

T E Narasimhan  |  Chennai 

Edappadi, Palaniswami, Tamil Nadu
Tamil Nadu Chief Minister Edappadi K Palaniswami

Chief Minister on Tuesday opposed a provision in the recent Master Directions for issued vide

In a letter to Prime Minister Narendra Modi, the chief minister said the Master Directions, which cover "all of Tamil Nadu" in the disincentive framework for priority sector lending, contain a very disturbing and discriminatory provision.

He said paragraph 7 of the Master Directions entitled “Adjustments for weights in PSL Achievement” contains a provision to incentivise flow of priority sector credit to districts with comparatively lower flow of credit, by according them a higher weightage of 125 per cent.

"Prima facie this is not objectionable. However what we find unacceptable is the disincentive framework contained in the guideline for districts with comparatively higher flow of priority sector credit, with a lower weightage of 90 per cent," said the Chief Minister.

He added that as per the annexure of the Master Directions, all 32 districts of (prior to bifurcation) have been categorised as districts with comparatively high flow of priority sector credit. Hence, all of has been covered in the disincentive framework for In no other State have so many districts been covered in the disincentive framework. Tamil Nadu appears to have been singled out for particularly adverse treatment in the Master Directions.

ALSO READ: Tamil Nadu opposes National Education Policy proposal on exam by NTA

While attempts can and should be made to increase credit flow to districts where it is low, such efforts ought to be by increasing the overall credit flow and not by attempting to divert credit from other districts / States. The overall size of the pie needs to be increased alongside greater financial penetration, said the Chief Minister.

He added, districts in Tamil Nadu have received a higher flow of credit on account of the enterprise, hard work, diligence and timely repayment of loans by households and businesses in the State.

These households and businesses have been good borrowers, utilising the loans for the intended purpose and servicing the debt on time. They should not now be penalised for having abided by the rules, by directing the flow of credit away from them. On the contrary, they should be encouraged to expand the economic activities in the country.

"Hence, this policy of the is unfair and regressive and must be reversed immediately. Hard working, law abiding borrowers who serviced their debt on time, deserve to be encouraged by higher flow of credit. All parts of the country and Tamil Nadu in particular have been affected by Covid-19 pandemic. Uninterrupted flow of credit at this time is critical for revival of economic activity. No such retro grade action, adversely affecting flow of credit, should be taken," said the Chief Minister.

He added, dis-incentivising good borrowers who repay on time is a short-sighted and counter-productive strategy, for not just the overall economic well-being of the nation, especially when the nation is combating the impact of Covid-19, but also for the health of the banking system which is struggling with rising non-performing assets.

"I request you to prevail upon the to immediately reverse this decision and restore the earlier weightage system for free flow of priority sector credit," he said.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Tue, September 08 2020. 16:57 IST