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India central bank revises priority sector lending norms

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India's central bank revised guidelines for lending to the priority sector on Monday, with loans to medium enterprises, sanitation and renewable energy sectors coming under the ambit of priority sector lending.

[MUMBAI] India's central bank revised guidelines for lending to the priority sector on Monday, with loans to medium enterprises, sanitation and renewable energy sectors coming under the ambit of priority sector lending.

"The target for lending to the redefined priority sector is retained uniformly at 40 percent of adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposure, whichever is higher, for all scheduled commercial banks," the Reserve Bank of India (RBI) said in a notification.

Foreign banks will however be given time to comply with the revised norms, the RBI added, without specifying on a time period.

The target for lending to the agriculture sector has been retained at 18 per cent of ANBC, but the RBI has recommended a sub-target of 8 per cent of ANBC for small and marginal farmers, which is to be achieved in a phased manner.

The RBI's decision came a day after, and was broadly in line with, the government's proposed changes to the priority sector lending norms.

In a note to clients on Monday, Macquarie Research termed the priority sector recommendations "very onerous especially for private banks."

It said although agriculture's contribution to the gross domestic product had decreased, the priority sector lending norms had not been revised to reflect the changing requirements, adding there was a need to bring loans to the infrastructure sector under the umbrella of priority sector lending.

REUTERS