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Sunday, July 22, 2018

Priority lending: Foreign banks with 20 branches under ambit

The proposal to mandate foreign banks to lend to small farmers and micro-enterprises was first mooted in April 2015 as part of the recommendations of an internal working group set up by the RBI to revisit existing priority sector lending norms.

By: ENS Economic Bureau | Mumbai | Updated: March 2, 2018 1:29:10 am
Priority lending: Foreign banks with 20 branches under ambit The proposal to mandate foreign banks to lend to small farmers and micro-enterprises was first mooted in April 2015 as part of the recommendations of an internal working group set up by the RBI to revisit existing priority sector lending norms.

The Reserve Bank of India (RBI) on Thursday brought foreign banks with at least 20 branches in India under the ambit of compulsory targeted lending to small farmers and micro-enterprises.

The directive is likely to apply to Standard Chartered Bank (with 100 branches in India), Citibank (35 branches) and HSBC (26 branches), according to September-end figures released by the RBI.

The proposal to mandate foreign banks to lend to small farmers and micro-enterprises was first mooted in April 2015 as part of the recommendations of an internal working group set up by the RBI to revisit existing priority sector lending norms.

In a notification on its website, the central bank said, “After undertaking a review of the priority sector lending profile of the above banks and to create a level playing field within banks, it has been decided that the sub-target of 8 per cent of Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposure (CEOBE), whichever is higher, shall become applicable for the foreign banks with 20 branches and above, for lending to the small and marginal farmers from FY 2018-19.”

In addition, the sub-target of 7.5 per cent of ANBC or CEOBE, whichever is higher, for bank lending to micro-enterprises shall also become applicable to foreign banks with 20 branches or more from FY19.

In its Thursday notification, the central bank also removed the currently applicable loan limits of Rs 5 crore and Rs 10 crore per borrower to micro-enterprises and small and medium enterprises (services), respectively, for classification under priority sector. “Accordingly, all bank loans to MSMEs, engaged in providing or rendering of services as defined in terms of investment in equipment under MSMED Act, 2006, shall qualify under priority sector without any credit cap,” the RBI said.

(With inputs from FE)

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