Revamping the priority sector lending (PSL) norms for banks, the Reserve Bank of India (RBI) on Thursday set targets for lending to small & marginal farmers, revised the limits for housing loans under such lending and asked foreign banks to achieve targets by March 2018.
The RBI has also removed the distinction between direct and indirect agriculture and also added medium enterprises, social infrastructure and renewable energy to the priority sector, in addition to the existing categories.
“The lending to agriculture sector has been re-defined to include farm credit (which will include short-term crop loans and medium/long-term credit to farmers), agriculture infrastructure and ancillary activities,” the RBI said in a notification. The total PSL target will remain at 40 per cent of the bank credit.
Within the 18 per cent target set for agriculture, the RBI has fixed a target of 8 per cent lending target for small and marginal farmers to be achieved in a phased manner — 7 per cent by March 2016 and 8 per cent by March 2017.
For the purpose of computation of 7-8 per cent target, small and marginal farmers will include: farmers with landholding of up to 1 hectare (considered as marginal farmers and farmers with a landholding of more than 1 hectare and up to 2 hectares (small farmers), landless agricultural labourers, tenant farmers, oral lessees and share-croppers.
Similarly, it has fixed a target of 7.5 per cent for micro enterprises in a phased manner — 7 per cent by March 2016 and 7.5 per cent by March 2017.
The RBI said loans to individuals for educational purposes, including vocational courses up to Rs10 lakh irrespective of the sanctioned amount, will be considered as eligible for priority sector. On the housing segment, it said loans up to Rs 28 lakh in metropolitan centres and loans up to Rs 20 lakh in other centres for purchase/construction of a dwelling unit per family will be considered as PSL provided the overall cost of the dwelling unit in the metropolitan centre and at other centres should not exceed Rs 35 lakh and Rs 25 lakh respectively.
Further, loans sanctioned by banks for housing projects exclusively for economically weaker sections and low income groups, the total cost of which does not exceed Rs 10 lakh per dwelling unit, will also be considered as PSL.
It said foreign banks with 20 branches and above will have priority sector targets and sub-targets for agriculture and weaker sections, which are to be achieved by March 31, 2018 as per the action plans submitted by them and approved by RBI. Foreign banks’ sub-targets for small and marginal farmers and micro enterprises would be made applicable post 2018 after a review in 2017.
“Foreign banks with less than 20 branches will move to total priority target of 40 per cent on par with other banks by 2019-20, and sub-targets for these banks, if to be made applicable post 2020, would be decided in due course,” the RBI said. Bank loans to food and agro processing units will be part of agriculture.
According to the RBI, export credit up to 32 per cent will be eligible as part of priority sector for foreign banks with less than 20 branches. For other banks, the incremental export credit over corresponding date of the preceding year will be reckoned up to 2 per cent.