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.