Fresh Boost For Priority Sector

Mumbai, April 29: | Updated: Apr 30 2002, 05:30am hrs
The Reserve Bank of India has taken a series of measures to improve credit delivery mechanism for the priority sector and in particular to agriculture. These measures include an increase in limits for financing of distribution of inputs for allied activities under priority sector increased to Rs 25 lakh from the present limit of Rs 15 lakh; an increase in credit limit for farmers for marketing crops pledge financing to Rs 5 lakh from Rs 1 lakh and repayment schedules of such credit extended to 12 months from six months at present.

To avoid double counting, sponsor banks have been asked to exclude funds provided to regional rural banks for lending to priority sector while meeting the target. The central bank also further liberalised the credit facilities for small scale industrial (SSI) units and banks are allowed to increase the limit of dispensation of collateral requirement for loans to Rs 15 lakh from the existing Rs 5 lakh on the basis of good track record of the units and financial position of SSI units.

Under the present regulation, the banking industry needs to allocate 40 per cent of its net credit for the priority sector. Also on the micro-credit front, RBI has directed that scheduled commercial banks and the National Bank for Agriculture and Rural Development to take immediate steps in forming linkages with self help groups across the country to achieve the target of 1.25 lakh persons for 2000-2003.

The central bank pursuant to the announcement made in the budget has increased the funds for Rural Infrastructure Development fund (RIDF-VIII) enhanced to Rs 5,500 crore and interest rate on loans to states from RIDF linked to the bank rate. The central bank had appointed a one man committee under SL Kapur to suggest measures for improving the delivery system and simplification of procedures for credit to SSI sector. Forty recommendations of the committee were accepted and commended to the banks for the immediate implementation. Some of the important recommendations include delegation of more powers to the branch managers, simplification of application forms, opening of more specialised SSI branches, enhancement in the limit for composite loans and strengthening of recovery mechanism.