Renewables to Jan Dhan: RBI changes priority sector lending norms to include new categories

The Reserve Bank today revised priority sector lending norms, asking banks to give 8 per cent of the total credit to small and marginal farmers. It also widened the definition of priority sector by including medium enterprises, social infrastructure and renewable energy while retaining the lending target to the sector at 40 per cent. This seems to be an attempt to align with the policy priorities of the government. It is to be noted that the government has set an ambitious target of 175 GW for renewable energy production by 2022. [caption id=“attachment_2202726” align=“alignleft” width=“380”]  RBI. Reuters[/caption] However, the RBI has also made changes to certain sub-categories by fixing lending targets. Also, the distinction between direct and indirect agriculture has been dispensed with and loans to food and agro processing units will form part of agriculture. Eight per cent of total bank credit prescribed for small and marginal farmers within the agriculture segment has to be achieved in a phased manner – 7 percent by March 2016 and 8 percent by March 2017, RBI said. Overall target for agriculture has been kept unchanged at 18 percent. For micro enterprises, 7 percent lending by March 2016 and 7.5 percent by March 2017 has been prescribed. However, there will be no change in the 10 percent loan target for weaker sections. Existing categories in priority sector include agriculture, micro and small enterprises, export credit, education and housing loan. RBI said foreign banks with less than 20 branches will have to move to total priority sector target of 40 per cent, on par with other banks by 2019-20. Overdraft facility under Pradhan Mantri Jan Dhan Yojna (PMJDY) would also be considered as priority sector lending. With inputs from PTI