Medium enterprises to be included under priority sector: RBI

As per the Reserve Bank of India, the incremental bank loans to medium service enterprises (as defined in the Micro, Small and Medium Enterprises Development Act, 2006) provided after November 13, 2013, up to the credit limit of Rs 10 crore, would qualify as priority sector advances. This dispensation would remain in force up to March 31, 2013.

How would RBI’s step to treat medium enterprises under priority sector help?

The medium-sized units across various sectors are feeling the heat of ongoing slowdown, as payments from large companies are not being made timely. These enterprises have limited bargaining power and can’t endure dues for long. With lending to medium-sized units set to be treated as priority sector lending, banks would look to give loans to viable units which will in turn help banks in meeting priority sector lending targets. 

Status of Priority Sector Credit

As per a recent report by RBI, priority sector credit had increased in 2012-13, against a decline in overall growth. However, growth in priority sector credit was lower than the growth in overall credit. In 2012-13, credit to priority sectors by public and private sector banks was at 36.3% and 37.5% respectively, against the overall target of 40%.
For micro and small industries, dues were at Rs 2.84 lakh crore, as of March 2013, growth of 20.3% compared to 2012.

Month: Current Affairs - December, 2013