The Reserve Bank of India (RBI) is examining a proposal for a uniform target in priority-sector lending for all domestic and foreign banks at 40 per cent of net bank credit (NBC). Currently, foreign banks’ priority sector target is pegged at 32 per cent, while it is mandatory for domestic banks to lend a minimum 40 per cent of their NBC to the priority sector.
The AS Ganguly committee on the flow of credit to the small-scale industry (SSI) sector has suggested hiking the foreign banks’ target. The committee pointed out the inherent flaw in the practice of foreign banks depositing shortfalls in agri-lending with the Small Industrial Development Bank of India (Sidbi) in meeting the target for lending to the priority sector.
