Money & Banking

RBI to review priority sector lending norms this year

Our Bureau Mumbai | Updated on March 09, 2018 Published on August 21, 2014

Says these have not kept pace with the changing economic priorities

The RBI will review priority sector guidelines this year to help it keep pace with the changing economic dynamics, the central bank said in its Annual Report on Thursday.

“The priority sector guidelines have not kept pace with changing economic priorities and may lead to less efficient use of resources.

“During the course of the year, priority sector guidelines will be reviewed,” the RBI said.

Currently, banks are required to lend 40 per cent to the priority sector, which includes, among others, agriculture, education, export credit, housing, and micro and small enterprises.

NBFC framework

Laying out its vision and agenda for 2014-15, the RBI also said it will review the existing regulatory framework for NBFCs, keeping in view the developments in the sector and various Financial Sector Legislative Reforms Commission (FSLRC) recommendations.

Consequently, the RBI said some of the areas being reviewed include prudential regulations with a view to strengthening core capital, asset classification and provisioning norms, acceptance of deposits, corporate governance, consumer protection and enhanced reporting, disclosures and transparency for the sector.

Risk exposure

It is also looking to review the exposure limits for single and group of counterparties to help mitigate risks during cyclical downturns as banks’ exposure under the framework will be more granular and diversified to a large number of unrelated counterparties, rather than being concentrated to a handful of large and related counterparties.

Currently, the exposure limits are much higher at 40 per cent of capital funds (plus 10 per cent for infrastructure finance).

Published on August 21, 2014
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