Priority sector lending for foreign banks raised to 40%

Priority sector lending for foreign banks raised to 40%

Foreign lenders with large presence in India, like Citi Bank and StanChart, will have to follow the same priority sector lending norms as the Indian banks, Reserve Bank of India (RBI) said on Friday.


While issuing the revised guidelines on priority sector lending targets, the RBI said foreign banks with branch network of 20 and above will have to abide by the priority sector lending target, which has been retained at 40 per cent of their total advances. They are allowed to reach the target in a phased manner over a maximum period of 5 years starting April 1, 2013, RBI said.

For smaller lenders, the target remains at 32 per cent.
RBI also said education and home loans up to the specified limits, and advances to individuals for up to Rs 50,000 to clear debts of money lenders, will be treated as priority lending. StanChart Bank, Citi Bank, HSBC and Royal Bank of Scotland have more than 20 branches in India.


These banks will be required to submit an action plan for achieving the targets over a specific time frame to be approved by the central bank, RBI said.


In the home loan segment, RBI said advances of up to Rs 25 lakh in cities with population of over 10 lakh, and Rs 15 lakh in other towns, will be treated as priority lending. Earlier, all loans up to Rs 25 lakh for purchase and construction of dwelling units constituted priority lending. The priority sector lending include small value loans to farmers for agriculture and allied activities, micro and small enterprises, housing for poor, education and other low income groups and weaker sections.


RBI said the targets under both direct and indirect agriculture have been retained at 13.5 per cent and 4.5 per cent, respectively, while refocusing the direct agricultural lending to individuals, Self Help Groups (SHGs) and Joint Liability Groups (JLGs) directly by banks.
Overdrafts up to Rs 50,000 in no-frills account, loans to individuals other than farmers up to Rs 50,000 to prepay their debt to non-institutional lenders and advances to state sponsored organisations for scheduled castes and scheduled tribes too are priority sector lending.


The new guideline is based on the report of Nari Committee which was set up in August 2011 to  suggest revised guidelines with regard to priority sector lending and related issues.

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