IDBI for changes in priority sector norms

IDBI CMD M Damodaran said the new IDBI had got a five-year regulatory forbearance on the RBI statutory liquidity ratio (SLR) norms, and complying with the cash reserve ratio (CRR) norms would entail putting in Rs 2,000 crore, which would not be a problem for an institution of IDBI’s size. “On priority sector lending, too, we should not be having any problems,” he said. “There could be a question of how in the context of this organisation, the priority sector concept should be addressed. It is a matter which we will have to take up with the RBI.”

“The area in which IDBI has been functioning should legitimately be construed as priority. The area of development finance cannot be non-priority,” Damodaran explained. He said unlike the SLR and CRR which were statutory prescriptions, priority sector lending has been mandated through directions of the RBI through orders issued by the apex bank. The definition of priority sector has not remained unchanged ever since the concept of priority sector began, the IDBI chairman pointed.

“All that it (RBI) says is 40 per cent of net bank credit in a particular year should go to the priority sector. Our contention will be that what the present IDBI has done until now, which would constitute more than 40 per cent of the credit it has extended so far, legitimately belongs to the area of development finance and I don’t think that it is anybody’s case that development finance should not be treated as priority sector. In fact, the entire spirit of the Standing Committee’s observations, the recommendations in Parliament etc are that the development finance function should not be abdicated. So quite clearly, that would qualify as priority sector,” Damodaran said.