Banks' exposure to priority sector loans may be retained at 40%, reports CNBC-TV18’s Gopika Gopakumar. The RBI committee under the current Union Bank Chairman MV Nair has come out with their recommendations on lending to priority sector. It has reviewed the existing guidelines on lending to priority sector categories including agriculture, MSME and export.
What do they recommend?
> Priority sector targets for public sector and private sector banks could be retained at the current level of 40% of the net credit to the sector.
> It has recommended severe changes should be made to exposure of foreign banks. Foreign banks’ priority sector target should be upped from 32% to 40%. However, this could put pressure on foreign banks to increase their lending to priority sector categories including agriculture and export sectors.
> RBI had been a little cautious of a bank lending to NBFCs, but the committee has recommended that 5% of bank's credit to NBFCs could be classified priority sector. Lending to gold companies will not be classified as priority sector.
> Securitized loans could also be classified under the priority sector. This will remove the pressure on banks and NBFCs while lending to these sectors. It would come as a relief for banks and NBFCs.
> Special treatment should be given to small and marginal farmers and housing loans below Rs 2 lakhs should be classified under priority sector.
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