The Hindu Business Line : RBI directive to foreign banks on priority lending shortfall

THE Reserve Bank of India has said that foreign banks operating in India should place the amount of shortfall in their priority sector-lending obligation with SIDBI for a tenure of three years.

The funds placed with SIDBI will have a graded interest rate structure linked to the Bank Rate, the central bank has said in a notification to foreign banks here today.

The RBI has said the move is in keeping with the recommendations made by the Ganguly Working Group in regard to evaluation of methods of utilisation of deposits made by foreign banks with SIDBI for shortfall in their priority sector obligation.

The overall shortfall target which includes 32 per cent of net bank credit, 10 per cent SSI lending and 12 per cent export finances, will carry the rate of interest on the entire deposit to be made with SIDBI on an annualised basis. SIDBI will pass on the lower interest rates to the borrowers, RBI has said.

The scheme would be made effective from the financial year 2005-06 so that foreign banks have adequate time to plan deployment of their resources, according to the central bank.

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