The recommendation to classify bank loans to non-banking financial companies (NBFCs) for on-lending to specified segments as priority-sector lending will help banks achieve their priority-sector targets, said Mr S.L. Bansal, Executive Director, United Bank of India, and Chairman and Managing Director-designate, Oriental Bank of Commerce.
“Till March 2011, bank lending to NBFCs was allowed to be classified as priority sector lending and there was no cap on such lending. However, in April 2011, Reserve Bank of India disallowed banks to take that route (of lending to NBFCs and classifying those as priority sector) in order to encourage direct lending. However, the present recommendation of the committee will help banks meet their priority sector lending targets,” Mr Bansal said.
The raise in the limit under priority sector for advances towards education and home loans will also help fuel growth in these sectors. “Education and housing are two priority areas for the country and raising the limits under these two sectors is a welcome suggestion,” he added.
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