RBI relaxes priority loan eligibility norm for MFIs on lending

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RBI relaxes priority loan eligibility norm for MFIs
Reserve bank has made the bank credit for onlending by Micro Finance Institutions (MFIs) eligible for categorisation as priority sector lending if at least 70 per cent ( it was 75 per cent earlier) of loans given by MFIs is for income generating activity.

In a notification, RBI said, "...it has been decided that bank credit to MFIs for onlending will now be eligible for categorisation as priority sector advance if aggregate amount of loan, extended for income generating activity, is not less than 70 per cent of the total loans given by MFI."

Lending towards agriculture, micro and small enterprises, education, housing, and export credit are termed as priority sector lending.

As per RBI norms, domestic banks are advised to achieve the target of priority sector lending at 40 per cent.

However, foreign banks with 20 and above branches in the country are required to be at par with domestic banks for priority sector targets in a phased manner over a maximum period of 5 years beginning April 1, 2013 i.e., till March 31, 2018.

Read more about: rbi
Story first published: Friday, June 28, 2013, 9:20 [IST]
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