RBI Expanded The Lending Norms on Priority Sectors

The Reserve Bank of India (RBI) on 18 October 2012 extended the lending’s on the Priority sectors like housing, agriculture, small and medium enterprises, and expanded the scope of bank loans for these sectors up to 2 crore Rupees. These ammendments would be in effect from 20 July 2012. 
The decision came after discussions were held with the CMDs/CEOs of selected banks as well as the heads of Priority Sectors of selected banks and based on the same the new guidelines and amendments were made. 
Important points of the New Guidelines and amendments on Priority sector Lending are as follows:- 

• The banks were permitted by the central bank to offer loans up to an aggregate limit of  Rs. 2 crore, to corporate that includes farmers’ producer companies, co-operatives and partnership firms of famers indulged in agricultural and allied activities including animal husbandry, bee-keeping, dairy, fishery and sericulture. The Priority loan would also be made available for pre-harvest and post-harvest activities like weeding, spraying, grading, harvesting and sorting. Export Credit loans for exporting one’s own farm produce would also be made available. The lending scheme fulfills the criterion mentioned under the MSMED Act-2006. 
• Bank loans to Micro and Small Enterprises (MSEs) those are engaged in providing services would be eligible for the direct finance of up to 2 crore Rupees per borrower per unit under priority sector. In case the loan amount per borrower increases the limit of 2 crore rupees, than it can be considered as the indirect finance for agriculture. 
• Loans under priority sector would also include loans provided to Government agencies for development of dwelling units or slum clearance and rehabilitation up to 10 lakh rupees. This provision also spreads for low income group and the economically weaker sections of the society in form of housing finance, construction and re-construction, purchase and more up to ceiling. 
• The Central Bank also guided the banks to keep a check on the loans, which are offered for the approved purposes. Thus the banks engaged in issuing loans would have to put forward a fine and channeled internal system and control in this regard. The apex court decision came to ensure that credit needs of people who don’t have access to institutional finance.