RBI notifies priority sector lending norms

In a major relief to banks, the Reserve bank of India today allowed the banks to include direct finance to corporates for agriculture and allied activity of upto Rs one crore as priority sector lending (PSL) exposure as against the earlier exposure of Rs 20 lakh.

Similarly, home loan upto Rs 20 lakh will also now be classified under priority sector advances compared to a limit of Rs 15 lakh earlier.

RBI, which notified revised PSL norms, said the norms will be effective with immediate effect. Any bank which has difficulty in complying with the revised guidelines may approach the central bank with appropriate reasons and time frame for compliance, it said.

The targets for PSL will be linked to adjusted net bank credit (ANBC) or credit equivalent amount of off-balance sheet exposures (OBE), which ever is higher, at the end of the previous financial year (March 31). The outstanding NRI deposits (FCNR (B) and NRNR) will not be deducted for computing obligation for priority sector lending.

The existing investments by banks in non-SLR bonds in the held to maturity (HTM) category will not be considered for calculating ANBC up to March 31, 2010. However, fresh investments by banks in non-SLR bonds (held in HTM category) will be counted for determine PSL targets.

The outstanding deposits placed with NABARD/SIDBI by banks for not meeting PSL norms for agri and SME sector will eligible for classification as indirect finance (under PSL) upto March 2010 only. Fresh deposits will not enjoy this categorisation, RBI said.

On home loans, RBI said loans up to Rs 20 lakh to individuals for purchasing and construction of dwelling unit per family, and loans given for repairs to the damaged dwelling units of families up to Rs one lakh in rural and semi-urban areas and up to Rs. 2 lakh in urban and metropolitan areas would qualify as priority sector lending.