Nair Committee Report on Priority Sector Lending

Nair Committee Report on Priority Sector Lending

The Reserve Bank of India, on February 21, 2012 has released the report of the Committee (Chairman: M V Nair, Chairman, Union Bank of India) constituted to re-examine the existing classification and suggest revised guidelines with regard to priority sector lending and related issues.

The Major Recommendations of the Nair Committee are:

• The sector ‘agriculture and allied activities’ maybe a composite sector within priority sector, by doing away with distinction between direct and indirect agriculture. The targets for agriculture and allied activities may be 18% of Adjusted Net Bank Credit (ANBC) or credit equivalent of off-balance sheet exposure (CEOBE), whichever is HIGHER.
  
• A sub target for small and marginal farmers within agriculture and allied activities is recommended, equivalent to 9% of ANBC or CEOBE,whichever is HIGHER to be achieved in stages by 2015-16.
• The MSE sector may continue to be under priority sector. Within MSE sector, a sub target for micro enterprises is recommended equivalent to 7% of ANBC or CEOE, whichever is HIGHER to be achieved in stages by 2013-14.
• The priority sector targets for foreign banks may be increased to 40% of ANBC or CEOBE, whichever is higher with sub-target of 15% for exports and 15% for MSE sector, within which 7% may be earmarked for micro enterprises.

Bank loans to non-bank financial intermediaries for on lending to specified segments may be allowed to be reckoned for classification under priority sector, up to a minimum of 5% of ANBC or CEOBE, whichever is HIGHER, subject to certain due diligence and documentation standards.