RBI tells banks to follow priority sector lending rules strictly

KOLKATA: Reserve Bank of India told banks that contingencies liabilities and off-balance sheet items can not be considered as priority sector lending.

The central bank said some banks are violating the priority sector lending rules to achieve the annual target. It has now told these banks to declassify the contingent liabilities and off-balance sheet items as priority sector loans with retrospective effect.

Banks are stipulated to lend 40% of their total adjusted net bank credit (ANBC) of last fiscal to priority areas like agriculture, small manufacturing units or exports. They are supposed to lend 18% of the ANBC to agriculture and allied services as a sub target.

"Banks are advised to declassify such accounts with retrospective effect, where a contingent liability / off-balance sheet item is treated as a part of priority sector target achievement," RBI said on Friday without disclosing the names of the banks violating the rule.

"We also clarify that all types of loans, investments or any other item which are treated as eligible for classifications under priority sector target and sub-targets should also form part of adjusted net bank credit," the central bank said.