Chidambaram: New plan
Mumbai, Sept. 27: The government plans to bring export credit within the ambit of priority sector lending.
Finance minister P. Chidambaram said here today that the Centre had initiated talks with the Reserve Bank of India to widen the scope of priority sector lending.
Banks will welcome the move since many of them have a shortfall in their priority sector lending target, which is capped at 40 per cent of their total lending.
The RBI data show that priority sector lending (PSL) of all scheduled commercial banks as on March 22 this year amounted to Rs 15,398 billion of the gross bank credit of Rs 49,641.8 billion — putting PSL at about 31 per cent, leaving a shortfall of around 9 per cent.
At present, loans to agriculture and certain other segments such as micro and small enterprises, education and housing are treated as PSL.
Though the priority sector norms of the RBI mention export credit as one of the categories, it is not a separate category in itself. Export credit to eligible activities under agriculture and medium and small enterprises is reckoned for priority sector lending under respective categories.
It is now learnt that the finance ministry wants export credit to be treated as a separate category.
If export credit is treated as PSL, it will incentivise banks to lend more to exporters and boost exports from last year’s level of $306 billion.
A surge in exports will hopefully narrow the trade deficit and eventually the current account deficit, which peaked at 4.8 per cent of GDP (gross domestic product) last year.
The move to reclassify export credit as priority sector lending comes at a time export-oriented sectors are largely expected to benefit from the recent depreciation in the value of the rupee.
On the rupee’s depreciation, the finance minister said the right value of the currency was 59-60 against a dollar and it should not overshoot that level.
The Indian currency today traded at 62.48, down 41 paise against the dollar.