RBI may revamp agriculture & MSE lending to spur employment

The Reserve Bank of India is looking to revamp the structure of State-Level Bankers’ Committees (SLBC) to facilitate agriculture, micro and small enterprises (MSEs), and other priority sectors’ lending for employment generation, said the bank’s Deputy Governor S S Mundra while addressing bankers from across the nation on ‘Priority Sector Lending – Status, Issues and Future Agenda’ at a conference organised by College of Agricultural Banking.

“We are looking at revamping the entire structure of SLBC so that banks can lend more to the priority sector, which has the potential to create more jobs and self-employment,” said Mundra.

“Loans to priority segments like agriculture and SMEs support economic activities, generate income and surplus. Such borrowers also become worthy recipients of retail credit. Moving over to priority sector makes business sense,” he added.

Mundra informed that in the SLBC structure, district-level lead bank offices prepare the District Credit Plan after which the National Bank for Agriculture and Rural Development (NABARD) prepares the Potential Linked Credit Plan, which then the SLBC adopts and distributes amongst banks.

Mundra also informed that the central bank is at an advanced stage of a project to extract data from banking systems and help banks apply analytics and prepare the right lending strategies.

The sectors which impact large sections of the population, the weaker sections and the sectors which are employment-intensive such as agriculture, and tiny and small enterprises, are considered a part of the priority sector.

At a meeting of the National Credit Council held in July 1968, it was emphasised that commercial banks should increase their involvement in the financing of priority sectors, viz., agriculture and small scale industries. The description of the priority sectors was later formalised in 1972 on the basis of the report submitted by the Informal Study Group on Statistics relating to advances to the Priority Sectors constituted by the Reserve Bank in May 1971. On the basis of this report, the Reserve Bank prescribed a modified return for reporting priority sector advances and certain guidelines were issued in this connection indicating the scope of the items to be included under the various categories of priority sector.

Although initially there was no specific target fixed in respect of priority sector lending, in November 1974 the banks were advised to raise the share of these sectors in their aggregate advances to the level of 33 1/3 per cent by March 1979.