Money & Banking

Priority sector lending norms for banks under review, says RBI chief

Our Bureau Mumbai | Updated on January 07, 2020 Published on January 07, 2020

Higher share of retail prices for farmers will help sustain demand: Shaktikanta Das

The Reserve Bank of India (RBI) is reviewing the priority sector lending (PSL) norms for banks, keeping in view the changing needs of the economy and to make them more inclusive, according to Governor Shaktikanta Das.

PSL includes loans given by banks to sectors such as agriculture, micro, small and medium enterprises (MSMEs), export credit, education, housing, social infrastructure and renewable energy.

“Through priority sector lending norms for commercial banks, we aim to support farm and non-farm sector activities that are sources of livelihood for a large cross-section of population,” the Governor said in his opening remarks at the third Suresh Tendulkar Memorial Lecture by Tharman Shanmugaratnam, Senior Minister, Republic of Singapore.

Agri reforms

In the area of agricultural market reforms, Das said there is consensus that the improvement in the supply chain could become a major channel for promoting inclusive growth, as this can increase the share of farmers in retail prices paid by the consumers.

A survey conducted by the RBI in 2018 that covered farmers, traders and retailers in 85 mandis, spread across 16 States, found that the difference between retail prices that consumers pay and mandi prices that farmers receive (margins or mark-ups) varies across crops and centres. The average share of farmers in retail prices of major primary food items varies between 28 per cent to 78 per cent. It is lower for perishables and higher for non-perishable items.

The Governor said: “Higher share of retail prices going to farmers augurs well for the rural economy, which, in turn, could help sustain domestic demand. Initiatives towards wider rural roads network, better communication facilities for faster exchange of information, and easier access to micro credit will contribute to better price realisation for the farmers.”

Ways to boost farm income

He observed that this ongoing process needs to be sustained, alongside further agricultural market reforms. Prioritising food-processing industries in the policy agenda, encouraging direct sale of farm produce by farmers to consumers, strengthening e-NAM (national agriculture market) for better price discovery, and promoting storage facilities near producing centres will boost farm income and rural employment opportunities.

Das said the RBI has also taken various measures to increase the level of penetration of banking services to the unserved and underserved areas. Recently, the National Strategy for Financial Inclusion (2019-24), prepared by the RBI, was approved by the Financial Stability and Development Council (FSDC).

It sets forth the vision and key objectives of financial inclusion policies in India and aims to provide access to formal and affordable financial services, broaden and deepen financial inclusion, and promote financial literacy and consumer protection.

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Published on January 07, 2020
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