Upto Rs 2 cr in agri loans to qualify for priority sector status

Loans to HFCs to be considered under PSL

The Reserve Bank of India (RBI) has revised lending norms under which loans up to Rs 2 crore to agricultural companies will qualify for PSL (priority sector lending) status.

Under the revised norms, any lending, with an aggregate limit of Rs 2 crore, by banks to corporates including producer companies of individual farmers, partnership firms and co-operatives of farmers in agriculture and allied activities like dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture, would qualify for priority sector lending.

In case, the loan exceeds the limit of Rs 2 crore by each borrower, the entire loan should be treated as indirect finance to agriculture, RBI stated on Wednesday.

Apart from loans in direct agri segment, bank loans to housing finance companies (HFCs) for onward lending for purchase or construction as well as reconstruction of individual dwelling units or for slum clearance & rehabilitation of slum dwellers would also be considered for PSL status, it said.

However, the limit for these loans in the housing sector is up to Rs 10 lakh per borrower and the interest rate charged to the ultimate borrower should not exceed the lowest lending rate of the bank’s other housing loans plus 2 per cent per annum.

For the purpose of identifying economically weaker sections and low income groups, the apex bank has prescribed the family income limit at Rs 1.2 lakh per annum, which is irrespective of location.

Further, RBI made it clear that the eligibility under priority sector loans to HFCs is restricted to 5 per cent of individual bank’s total priority sector lending, on an ongoing basis. At the same time, the maturity of bank loans should be co-terminus with average maturity of loans extended by HFCs.

In this context, Gruh Finance MD Sudhin Choksey opined that the RBI initiative will certainly benefit companies (HFCs) as the funds flowing from banks would now be considered for the priority sector. So, the avenues for raising more money from banks will increase, explained Choksey and pointed out that unless banks lend below the base rate, it would not prove to be an inexpensive option for housing finance companies.
Banks should also maintain necessary borrower-wise details of the underlying portfolio, RBI noted.

Also, credit to micro and small enterprises (MSEs) engaged in services segment will be eligible for direct finance under priority sector up to an aggregate loan limit of Rs 2 crore per borrower or unit.