4-Sep-2020: RBI Releases Revised Priority Sector Lending Guidelines

Reserve Bank of India has comprehensively reviewed the Priority Sector Lending (PSL) Guidelines to align it with emerging national priorities and bring sharper focus on inclusive development, after having wide ranging discussions with all stakeholders.

Revised PSL guidelines will enable better credit penetration to credit deficient areas; increase the lending to small and marginal farmers and weaker sections; boost credit to renewable energy, and health infrastructure.

Bank finance to start-ups (up to ₹50 crore); loans to farmers for installation of solar power plants for solarisation of grid connected agriculture pumps and loans for setting up Compressed Bio Gas (CBG) plants have been included as fresh categories eligible for finance under priority sector. Some of the salient features of revised PSL guidelines are:

1. To address regional disparities in the flow of priority sector credit, higher weightage have been assigned to incremental priority sector credit in ‘identified districts’ where priority sector credit flow is comparatively low.
2. The targets prescribed for “small and marginal farmers” and “weaker sections” are being increased in a phased manner.
3. Higher credit limit has been specified for Farmers Producers Organisations (FPOs)/Farmers Producers Companies (FPCs) undertaking farming with assured marketing of their produce at a pre-determined price.
4. Loan limits for renewable energy have been increased (doubled).
5. For improvement of health infrastructure, credit limit for health infrastructure (including those under ‘Ayushman Bharat’) has been doubled.

10-Feb-2020: RBI offers CRR exemption to banks for lending to auto, housing, MSMEs

In a bid to spur credit growth and boost demand, the Reserve Bank of India (RBI) has offered banks Cash Reserve Ratio (CRR) exemption for five years for incremental credit disbursed to automobiles, residential housing, and micro, small and medium enterprises (MSMEs) between 31 Jan-31 July, 2020.

The RBI is actively engaged in revitalising the flow of bank credit to productive sectors having multiplier effects to support growth impulses.

According to RBI statement, banks are allowed to deduct the equivalent amount of incremental credit disbursed by them as retail loans to automobiles, residential housing, and loans to micro, small and medium enterprises (MSMEs), over and above the outstanding level of credit to these segments as at the end of the fortnight ended January 31, 2020 from their net demand and time liabilities (NDTL) for maintenance of CRR.

The central bank said banks can claim first such deduction from NDTL of 14 February for CRR exemption.

Banks are advised that they can claim the first such deduction from the NDTL of February 14, 2020 for the amount equivalent to the incremental credit extended to the sectors indicated above over the outstanding level of credit as at the end of the fortnight ended January 31, 2020.

As per RBI, an amount equivalent to the incremental credit outstanding from the fortnight beginning January 31, 2020 and up to the fortnight ending July 31, 2020 will be eligible for deduction from NDTL for the purpose of computing the CRR for a period of five years from the date of origination of the loan or the tenure of the loan, whichever is earlier.

RBI said the bank must maintain proper fortnightly records of net incremental credit extended to the select sectors/NDTL exemption claimed, duly certified by the Chief Financial Officer (CFO) or an equivalent level officer, for supervisory review.