The Hindu Business Line : `Priority' tag for loans to SHGs

Loans to self-help groups engaged in agriculture and allied activities will now be categorised as direct finance to agriculture within the priority sector, said the Reserve Bank of India on Tuesday. It is in response to banks requesting for the change. Banks will have to maintain separate data on SHG--micro credit portfolios. In the circular issued in July 2006, the RBI had said loans provided to NGOs or SHGs for on-lending to members or small groups are to be classified as priority sector advances.

Agriculture advances form 18 per cent of the 40 per cent priority sector norm. The RBI recently changed the base for calculating the 40 per cent priority sector norm for banks from net bank credit to the `adjusted net bank credit (`Net bank credit plus investments in non-SLR bonds held in `held-to-maturity' category) or credit equivalent of `off-balance sheet' exposures, whichever is higher.

This has raised the quantum banks will have to lend to agriculture, micro credit, small scale and micro enterprises.

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