Tuesday, August 14, 2012

RBI tweaks priority sector lending norms

The Reserve Bank of India (RBI) has added several activities under the priority sector lending
category, but has retained the overall target at 40% for commercial banks. The Reserve Bank of India (RBI) also revised guidelines of priority sector lending based on the recommendations of the committee formed to study the existing norms under the chairmanship of MV Nair. Loans to all micro and small manufacturing companies, loans to food and a groprocessing units, to distressed farmers and loans for setting up off-grid renewable energy solutions are now included in priority sector lending. Also home loans of up to Rs 25 lakh in metropolitan areas having population above 10 lakh, education loans of up to Rs 10 lakh in India and up to Rs 15 lakh for overseas, overdraft of up to  50,000 in no-frills accounts are included.Banks' investments in securitised loans, wherein  the underlying qualifies for priority sector label, will be included in priority sector lending target.
However, the interest rate on the underlying loan must not exceed the base rate plus 8% of the
investing bank.


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