A recent press report said that the Reserve Bank of India has made up a committee on priority sector under the Chairmanship of Mr. M V Nair, Chairman & Managing Director of Union Bank of India. The RBI has set up a committee to reexamine the existing classification and suggest revised guidelines with regard to priority sector lending classification and related issues.
Mr. Nair said that it was essential from the political economy perspective that extension of formal credit is broad-based, timely and adequate. He said that it is important to have a complete view on the entire range of priority sector. Significant efforts have been made by banks over the years in making credit available to the so-called priority segments. However, the ground reality remains that a large section of farmers and micro & small enterprises do not have access to bank finance.
Reports said that the terms of reference includes revisiting current eligibility criteria for classification of loans as priority sector, review definition of direct and indirect priority sector finance, and consider if bank lending by financial intermediaries to eligible categories of borrowers and activities could be classified under the priority sector.
Reports also said that the committee will examine the desirability of restricting interest rates on loans and review allocation mechanism for RIDF and interest rate payable on such funds and suggest a robust MIS.