RBI proposes ₹100-crore priority sector lending limit for agri infra, food processing
Mumbai: The Reserve Bank of India (RBI) has proposed allowing bank loans of up to ₹100 crore per borrower for agriculture infrastructure and food and agro-processing activities to qualify as priority sector lending (PSL), in a move aimed at improving institutional credit flow to underserved sectors.
The proposal is part of the central bank’s draft PSL directions released on Thursday.
Under the draft rules, loans for agriculture infrastructure will be eligible for PSL classification subject to an aggregate sanctioned limit of ₹100 crore per borrower across the banking system. A similar limit has been proposed for food and agro-processing activities.
Banks will have to sanction separate loan limits for these activities, obtain declarations from borrowers about loans taken from other banks for the same purpose and independently verify their aggregate exposure to ensure it does not exceed ₹100 crore. The limit will be calculated facility-wise and will not include the borrower’s other priority and non-priority sector exposures.
PSL targets
PSL is a policy mandated by the central bank that requires commercial banks to direct a specific portion of their bank credit to vital, underserved, and economically important sectors of the country. The draft directions are open to feedback till 26 November.
Agriculture infrastructure eligible for the classification includes warehouses, market yards, godowns, silos, cold-storage facilities, soil conservation and watershed development, seed production and agri-biotechnology. Food and agro-processing activities will also be eligible, subject to conditions.
Vehicles purchased by transporters will qualify under this category only if they are used exclusively for food and agro-processed products or are specifically designed for such use, such as cold-storage trucks.
The RBI has retained the overall PSL target at 40% of adjusted net bank credit (ANBC), or the credit equivalent of off-balance-sheet exposures, whichever is higher. Agriculture accounts for 18% of the target, including a 14% sub-target for non-corporate farmers and 10% for small and marginal farmers. The targets for micro enterprises and weaker sections are 7.5% and 12%, respectively.
The RBI has also proposed a 5% cap on eligible bank lending to NBFCs and other institutions for on-lending, subject to specified exemptions. The draft provides for quarterly monitoring of PSL compliance, with banks required to submit data within 15 days of each quarter-end.
Banks that fall short of targets may be asked to contribute to funds maintained with institutions such as National Bank for Agriculture and Rural Development (NABARD), National Housing Bank (NHB), Small Industries Development Bank of India (SIDBI) and MUDRA.
The framework also provides for different weightages for incremental lending in districts with lower and higher priority-sector credit flows, at 125% and 90%, respectively. The RBI said the directions aim to ensure adequate bank credit reaches sectors that contribute to socio-economic development but remain underserved despite being creditworthy.
The definition of small and marginal farmers for the sub-target includes farmers with landholdings of up to two hectares, tenant farmers, sharecroppers and landless agricultural labourers meeting prescribed conditions. Loans of up to ₹250,000 to individuals solely engaged in allied activities, such as dairy and fisheries, will also be included without a landholding requirement.
The draft specifies housing loan limits of ₹50 lakh, ₹45 lakh and ₹35 lakh for homes in centres with populations of 50 lakh and above, 10 lakh to below 50 lakh, and below 10 lakh, respectively. Loans for repairs to damaged houses will also qualify, subject to lower limits. Education loans of up to ₹25 lakh, including those for vocational courses, will be eligible.
Other provisions include loans of up to ₹8 crore for schools, drinking-water and sanitation facilities, and ₹12 crore for healthcare facilities in Tier 2 to Tier 6 centres. Renewable-energy projects and public utilities can qualify for loans up to ₹35 crore, while the limit for individual households is ₹10 lakh.
The draft also retains several existing agriculture lending provisions. Loans to corporate farmers, farmer producer organisations, partnership firms and cooperatives for specified farming activities will remain eligible for PSL classification subject to an aggregate limit of ₹4 crore per borrowing entity.
Loans to FPOs undertaking farming with assured marketing at predetermined prices can qualify up to ₹10 crore. A separate limit of ₹10 crore has also been prescribed for loans to purchase produce directly from members engaged in agriculture and allied activities.
