Summary of Key Changes Proposed by Nair Committee on PSL Targets for Indian Banks Domestic SCBs Existing Proposed 40% 40% 18% (with 4.5% 18% (9% SFMF) max in-direct) No Target 7% to Micro No Target 10% 1% of total adv No Target 10% Abolish Foreign Banks Existing Proposed 32% 40% No Target No Target 10% (60% of 10% to Micro) 12% No Target 15% (7% of total to Micro) 15% (< INR 10 cr) No Target -
Total Advances Agriculture MSE Export Weaker Sections DRI
Agriculture (Domestic Banks)
Agriculture is critical sector for ensuring food security and poverty alleviation. This sector needs to be seen as a single set of activities, encompassing production, storage and distribution. As there is seamless connectedness of the entire agriculture value chain its impact on output, income and employment in rural economy is highly positive. Therefore ‘Agriculture and allied activities’ may be a composite sector within priority sector. The target for this sector is proposed at 18% of ANBC/CEOBE whichever is higher. A sub target of lending to Small and Marginal Farmers equivalent to 9% of ANBC, to be achieved in stages till 2015-16. Banks are also encouraged to ensure that number of outstanding beneficiary accounts registers a minimum annual growth rate of 15%. Considering that availability of credit rather than the channel or mode of delivery of credit is important and that credit to entire sector rather than the individual activities within the individual sector is important, concepts of ‘Direct’ & ‘Indirect’ lending to agriculture sector may be integrated in order to have all encompassing approach towards agriculture sector. This means that the earlier ceiling of 4.5% limit through ‘indirect channel’ is proposed to be done away with. To ensure that stressed assets in this sector do not arise, the Committee has strongly recommended the establishment of an Agriculture Credit Risk Guarantee Fund. Roadmap for achievement of sub-target under SFMF 21 PSBs and 15 Private Sector Banks currently have achievements below 9% (from 0-8.7%), hence it is proposed that every bank endeavors to record a minimum incremental growth of 1% of ANBC every year. However, for the sake of calculation of penalties for under achievement the following table of yearly targets will be used: Year 2012-13 2013-14 2014-15 2015-16 SFMF as % of ANBC 6 7 8 9
Micro & Small Enterprises (Domestic & Foreign) The committee has taken a comprehensive approach for MSE sector by proposing to do away with distinction between ‘direct’ and ‘indirect’ lending to MSE sector. Currently as per extant guidelines banks are required to increase the share of micro enterprises in MSE lending to 60%, in stages, by March 2012-13. The committee has proposed that a separate sub-target (as % of ANBC) will be more practical and feasible for banks to implement and monitor.
Lending by banks to Micro Enterprises (Loans as % of ANBC) Year 2007 2011 Publlic Sector Banks 3.34 6.94 Private Banks 0.97 4.67 Aggregate 2.86 6.54
In the view of the above the committee has recommended a sub-target, equivalent to 7 per-cent of ANBC, for lending to micro-enterprises to be achieved in stages latest by 2013-14. Also to ensure that the number of units financed also increases overtime the committee mandates banks to endeavor to achieve a minimum increase of 15% in number of accounts every year. Lending to MSE sector is covered under CGTMSE scheme. The company also proposes to include lending to Retail trade and SHG engaged in Micro enterprises under the purview of the scheme. Roadmap for achievement of Micro enterprise target Year Micro Enterprise Lending as % of ANBC 2012-13 6 2013-14 7
Micro Credit Loans provided by banks directly and through SHG/JLG mechanism will be eligible to be classified as priority sector advances subject to the conditions given below: Income limit of the individual beneficiary is Rs. 60,000 p.a. in rural areas and Rs. 120,000 p.a. in non-rural areas Loan does not exceed Rs....
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