Getting lending priorities right

Abstract

Rajan has proved that he can carry forward the the priority sector lending agenda that Subbarao left behind. On 23 April, the Reserve Bank of India (RBI) notified the new priority sector lending norms. These reflect the recommendations of the recent report of the internal working group of RBI. Three important issues need attention in reviewing the notification: (1) the treatment of foreign banks versus domestic banks; (2) the sub-targets for agriculture and micro enterprises and (3) the tradability of the portfolio.

With regard to the foreign banks, the recommendation was that priority sector targets should be on par with domestic banks—at 40% of adjusted net bank credit (as against the current 32%). Read more at: https://www.livemint.com/Opinion/TsOeXHu692VXb9o8AtcluO/Getting-lending-priorities-right.html