RBI to bring startups under priority sector lending category

RBI will also set up an expert committee, headed by veteran banker K V Kamath, which will give recommendations on various parameters to be factored into each resolution plan for corporate loans.

RBI to bring startups under priority sector lending category

Thursday August 06, 2020,

2 min Read

The Reserve Bank of India (RBI) on Thursday decided to broaden the scope of Priority Sector Lending (PSL) by including startups, and enhancing borrowing limits for renewable energy sectors.


The central bank would also increase the targets for lending to 'small and marginal farmers' and 'weaker sections' under the PSL.
RBI



The eligible entities get access to credit on easier terms from banks under the PSL. Banks are required to assign 40 percent of adjusted net bank credit or credit equivalent amount of off-balance sheet exposure, whichever is higher to priority sector, including agriculture and micro-enterprises, it said.


The PSL guidelines were last reviewed by the RBI in April 2015.


"With a view to align the guidelines with emerging national priorities and bring a sharper focus on inclusive development, the guidelines have been reviewed after wide-ranging consultations with all stakeholders," the RBI said.


The revised guidelines also aim to encourage and support environment-friendly lending policies to help achieve Sustainable Development Goals (SDGs).


Broadening the scope of PSL, it has been decided to include "startups; increasing the limits for renewable energy, including solar power and compressed biogas plants; and increasing the targets for lending to 'small and marginal farmers' and 'weaker sections', the central bank said.


To address the regional disparities in the flow of priority sector credit, an incentive framework has already been put in place for banks.


While higher weight would be assigned for incremental priority sector credit in the identified districts where credit flow is comparatively lower, a lower weight would be assigned to incremental priority sector credit in identified districts, where the credit flow is comparatively higher.


RBI also announced setting up of an expert committee headed by veteran banker K V Kamath, which will give recommendations on various parameters to be factored into each resolution plan for corporate loans.


"With the intent to facilitate the revival of real sector activities and mitigate the impact on the ultimate borrowers, it has been decided to provide a window... to enable the lenders to implement a resolution plan in respect of eligible corporate exposures without a change in ownership and personal loans, while classifying such exposures as standard, subject to specified conditions," RBI said in its Statement on Developmental and Regulatory Policies.


While announcing the monetary policy, Governor Shaktikanta Das said, "The underlying theme of this resolution window is the preservation of the soundness of the Indian banking sector."


Edited by Suman Singh