RBI tightens PS norms for MNC Banks

BE/RBI NOTE/6/2018

The Priority Sector lending Norma (PSLLending Norms) for Foreign Banks has further been tightened by Reserve Bank of India.

1. With this RBI has made it mandatory for the Foreign Banks, to create sub targets, with a view to confirm that a portion of their loans is extended to the small and marginal farmers and also micro enterprises from April this year.
2. The guidelines also adds that a foreign bank with over 20 branches, should follow this strictly, which means this will affect the banks like Standard Chartered, Citi and HSBC who has higher number of branches in the country.
3. Also, the Priority Sector Lending norms also makes it compulsory for the foreign banks to lend 40 per cent of their total loans portfolio to priority sector like Agriculture, Rural Infra, and MSMEs, apart from other Priority Sectors.
4. Further, RBI adds that a sub target of 8 per cent of net bank credit or credit an amount, which is equivalent of the Off Balance sheet exposure; whichever is higher “shall be applicable for foreign banks with 20 branches and aboe, for lending to MSMEs from FY 2019.
5. Also a further sub target of 7.50 per cent with the above criteria will be applicable to these banks from FY 2019 for lending to Micro Enterprises.
6. However, some relief is provided by the apex bank, by way of removal of the condition, which read ONLY LOANS OF UPTO 50 MILLION AND 100 MILLION EXTENDED TO MSMEs WOULD BE PSL COMPLIANT.

Thus, it is observed that the Apex Bank has advised the foreign banks to compulsorily create sub targets in order that small and marginal farmers as also MSMEs are compulsorily, benefitted from coming April.