Securitisation and re-lending made eligible
Housing loans up to Rs. 20 lakh to individuals
CHENNAI: Inclusion of securitisation and re-lending of priority sector advances, a focus on targeting of the directed credit and non-introduction of an overall target for small enterprises in the case of domestic banks are among features of the final guidelines on priority sector lending which the Reserve Bank of India (RBI) announced on Monday.
The guidelines, which follow two draft norms released for public discussion in 2006 and are based on the feedback as also the basic proposals submitted by the internal working group headed by C. S. Murthy in September 2005, will be enforced with immediate effect.
As proposed in the draft guidelines, the overall target (40 per cent) as also sub-targets will be linked to adjusted net bank credit (ANBC, which is defined as net bank credit plus investments made by banks in non-SLR bonds held in the held-to-maturity category or credit equivalent amount of off-balance-sheet exposure, whichever is higher), as against net bank credit that has been the basis ever since this model of directed lending system came into force in the nineteen eighties.
Investment by banks in securitised assets representing loans to various eligible categories of priority sector can be classified under the respective categories of priority sector. Similarly, outright purchases of any loan asset eligible to be categorised under priority sector will be eligible for classification under priority sector. Also, investments (in eligible lending) by banks through inter-bank participation certificates on a risk sharing basis and held for at least 180 days will be reckoned as priority sector lending. The outstanding balances of FCNR (B) and NRNR deposits will no longer be deducted for computation of ANBC for priority sector lending purposes, while on the assets side, investments made by banks in the recapitalisation bonds will not be taken into account.
The following are the broad targets under priority sector lending:
The guidelines have adopted the definition of small, medium and micro-enterprises as in the relevant legislation passed by Parliament.
The categories under priority sector in the case of domestic commercial banks will be as follows: total agricultural advances (18 per cent, including indirect lending not exceeding 4.5 per cent of ANBC); small enterprises (no sub-target within the overall priority sector target of 40 per cent); microenterprises: 40 per cent of total advances to small enterprises should go to micro-manufacturing and service enterprises with investment in plant and machinery up to Rs. 5 lakh and Rs. 2 lakh, respectively, and 20 per cent to those with investment of Rs. 5 lakh-Rs. 25 lakh and Rs. 2 lakh-Rs. 10 lakh, respectively. Thus sixty per cent of small enterprises advances should to go micro-enterprises. Micro-credit up to Rs. 50,000 is included in eligibility.
Weaker sections, 10 per cent; DRI (differential rate of interest) scheme: one per cent of total advances outstanding as at the end of the previous year.Forty per cent of this should go to SC/STs. At least two-third of DRI advances should be granted through rural and semi-urban branches.
Education loans up to Rs. 10 lakh/Rs. 20 lakh for study within the country/abroad and housing loans up to Rs. 20 lakh to individuals for purchase/construction of dwelling unit per familty and loans up to Rs. 1 lakh/Rs. 2 lakh for repairs respectively in the case of rural/semi-urban and urban/metropolitan areas will be included in priority sector lending; In the case of retail trade, advances to retail traders dealing in essential commodities (fair price shops), consumer cooperatives and advances granted to retail trader with credit limits not exceeding Rs 20 lakh will be included in priority sector lending.
For foreign banks too, the overall target remains unchanged (at 32 per cent). The sectoral targets are: 10 per cent for small enterprises, and this will include the sub-targets for micro-enterprises as fixed in the case of domestic banks; and export credit 12 per cent.