RBI To Bring Startups Under Priority Sector Lending Category

The Reserve Bank of India has decided to broaden the scope of priority sector lending by including startups and enhancing borrowing limits for the renewable energy sector.

The central bank would also increase the targets for lending to "small and marginal farmers" and "weaker sections" under priority sector lending.

Eligible entities get access to credit on easier terms from banks under priority sector lending. Lenders are required to assign 40% of adjusted net bank credit or credit equivalent amount of off-balance sheet exposure, whichever is higher, to priority sector, including agriculture and micro enterprises, it said.

The central bank had last reviewed the priority sector lending guidelines in April 2015.

"With a view to align the guidelines with emerging national priorities and bring sharper focus on inclusive development, the guidelines have been reviewed after wide-ranging consultations with all stakeholders," the RBI said, while announcing its bi-monthly monetary policy decisions on Thursday.

Broadening the scope of priority sector lending, it has been decided to include "start-ups; increasing the limits for renewable energy, including solar power and compressed biogas plants; and, increasing the targets for lending to 'small and marginal farmers' and 'weaker sections',” the central bank said.

To address the regional disparities in the flow of priority sector credit, an incentive framework has already been put in place for banks.

While higher weight would be assigned for incremental priority sector credit in the identified districts where credit flow is comparatively lower, a lower weight would be assigned to incremental priority sector credit in identified districts where the credit flow is comparatively higher.