New Priority Sector Lending Guidelines

Based on G.S.Muthy working group recommendations priority sctor lending guidelines have been revised.The broad categories of advances under priority sector now include agriculture,small enterprises sector,retail trade micro credit and housing sector subject to ceratin limits.The main changes are-
!.Advances in excess of Rs 1 crore granted to corporates will get only one third weightage for being counted under direct agriculture.
2.With a view to encouarging direct retail lending by banks intermediaries have been generally discouraged by keeping loans for onlending barring a few categories out of priority sector fold and by phasing out investment in bonds of financial institutions from priority sector.
3.Some of the banks had a ''nil''or negligible net bank credit and were engaged in mostly non -funded business [derivatives]This distortion has been sought to be corrected by linking their targets to the credit equivalent of their off-balance sheet business.
4.The overall priority sector lending targets at 40 percent and 32 percent for the domestic and foreign banks respectively as also other sub targets have been retained unchanged .However these are now calculated as apercentage of adjusted net bank credit or credit equivalent amount of of off -balance sheet exposure whichever is higher instaed of NBC[net bank credit]
5.Certain concessions granted earlier for the purpose of priority sector [e.g.exclusion of FCNR[B]or NRNR deposits from NBC] have lost foreign exchange.Such concessions have been withdrawn.
6.The revised guidelines also take in to account revised definition of small and micro enterprises as included in the Micro Small and Medium Enterprises Development Act 2006.