The Reserve Bank of India (RBI) has announced revision in priority sector lending guidelines on Thursday. Medium enterprises, social infrastructure and renewable energy will form part of priority sector, in addition to the existing categories, the central bank said.
S C Ralhan, president, Federation of Indian Export Organisations (FIEO) welcomed RBI's move to bring medium enterprises and exports under priority sector lending. While medium enterprises will be covered in general norms, However, for exports, credit upto 32% of annual net banking credit or credit equivalent amount of off-balance sheet exposure, whichever is higher, will be eligible as part of priority sector for foreign banks with less than 20 branches. For other banks including Indian banks, the incremental export credit over corresponding date of the preceding year will be reckoned upto 2% of ANBC or credit equivalent amount of off-balance sheet exposure, whichever is higher.
Ralhan said that increase in threshold limit of small and medium industries recently with RBI move on priority sector has ensured flow of credit to all manufacturers with investment in plant and machinery upto Rs 100 million now as against 10 million earlier.
FIEO chief added that while RBI has taken a step forward towards including export credit in the priority sector for domestic banks but restricting the facility to a sanctioned limit of Rs 250 million per borrower to units having turnover of up to Rs 1 billion would limit it to only a third of the exporting units. Ralhan hoped that the share of exports as a percentage of net bank credit which had come as low as 3.8% in March 2014 may be increased marginally but it will be much below the desired target if 12% fixed by RBI.
FIEO chief stated given the abysmal levels of credit to a sector which contributes 15% to the GDP of the country, a study maybe conducted as to the optimal cost of credit for exports so that Banks can lend 12% of their total lendable credit to export sector as per RBI’s guidelines.