MV Nair Panel on Priority Sector Lending

Reserve Bank panel headed by Union Bank of India Chairman and Managing Director M V Nair has made some important recommendations on priority sector lending. Please note the following points:

• Retaining the existing 40 per cent ceiling for the priority sector lending segment. It’s worth note that some banks were demanding lowering the targets while some other segments of society were demanding raising the targets. The report notes "Target of domestic Scheduled Commercial Banks (SCBs) for lending to priority sector is retained at 40 per cent of Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposure (CEOBE), whichever is higher"
• Creating a sub-head of micro enterprises within the micro and small enterprise (MSE) sector
• Raising education loan ceiling by Rs 5 lakh for students, under priority sector.
• Increasing the priority sector target for foreign banks from existing 32 per cent to 40 per cent of total advances, on par with the domestic banks. This recommednation is very important. The committe said that target for foreign banks would include sub-targets of 15 per cent for exports and 15 per cent for MSE sector, within which 7 per cent may be earmarked for micro enterprises.
• Limit under priority sector for loans for studies in India may be increased to Rs 15 lakh and Rs 25 lakh in case of studies abroad, from existing limit of Rs 10 lakh and Rs 20 lakh, respectively.
• The old classification of distinction between direct and indirect agriculture credit has been done away with by converting the segment into a composite one called agriculture and allied activities.