Priority sector lending to benefit only a few exporters: FIEO

MUMBAI : Even though the RBI positively revised guidelines on the priority sector lending, caps on turnover and sanctioned limits would limit these benefits to merely a third of exporters, according to the Federation of Indian Exporters'Organisations (FIEO).

"While the RBI has taken a step forward towards including export credit in priority sector lending for domestic banks, restricting the facility to a sanctioned limit of Rs 25 crore per borrower to units with turnovers of up to Rs 100 crore, would limit it to only a third of exporting units," FIEO president S C Ralhan said today.

He said that bank finance to the sector is at "abysmal levels" and contributes only 3.8 per cent of overall credit as against the sector's 15 per cent contribution to the GDP.

The RBI target is to take up contribution of bank credit to export sector to 12 per cent and hoped moves like increasing the export cap by ten times to investments of up to Rs 10 crore in plant and machinery to qualify as PSL, done earlier, will help increase the credit flow, he said.

Ralhan welcomed RBI's steps as per revised guidelines yesterday, including the move to bring medium enterprises and exports under priority sector lending.

In its revised guidelines, the RBI widened the scope of beneficiary sectors to include medium enterprises as well as allowed foreign banks with less than 20 branches to lend up to 32 per cent to the export sector up to 2019.

For bigger foreign banks and Indian banks, incremental export credit over corresponding date of preceding year would be reckoned up to two per cent of credit.

The RBI revised priority sector lending norms to ensure a phased increase in loans to small farmers and also made it clear that smaller foreign banks would have to meet the 40 per cent target over the next five years.

Medium enterprises, social infrastructure and renewable energy are new sectors which qualify under the mandatory priority sector lending norms which are aimed at uplifting weaker sections of the economy by increasing formal credit to them.

Banks have been asked to lend 40 per cent of their credit to such sections, failing which money would get deposited into a low-yielding fund for rural development.

Free market advocates complain against the necessity of such a requirement, saying that it stifles growth of banks.

Source : economictimes.indiatimes.com