The Reserve Bank of India has set up a 10-member committee to re-examine priority sector lending classification norms. The committee will function under the chairmanship of Mr M.V.Nair, CMD, Union Bank of India, and is expected to submit its report in four months time.

The committee has been asked to look into the eligibility criteria for priority sector loans with regard to the nature of activities, types of borrowers, limits on loan amounts, controls on end-use of funds, appropriate documentation etc.

The committee will also look into the issue of whether bank lending via financial intermediaries such as non-banking finance companies, housing finance companies, etc., for eligible categories of borrowers and activities could be classified under the priority sector and if so, to lay down suitable conditions.

The committee will also consider the desirability, or otherwise of capping interest rate on loans under the eligible categories of the priority sector and review the current allocation mechanism for RIDF and other Funds, the interest rates payable on RIDF and other Funds to non-compliant (defaulting) banks and the interest rates to be charged on loans from these funds.

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