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Minority loans to get priority lending status

Weaker sections to be part of priority lending says RBI

Apnaloan.com Research Bureau

10 Aug 2007

loans extended to minority communities would soon qualify for priority sector lending. The finance ministry has asked the Reserve Bank of India (RBI) to amend the priority sector norms to include minority communities under 'lending to weaker sections'.

The issue was raised at the finance minister's meeting with public sector bank chiefs and Reserve Bank of India Deputy Governor Usha Thorat.

Banks are required to disburse 10 per cent of loans to weaker sections, which currently include scheduled castes and scheduled tribes, small and marginal farmers, artisans and distressed urban poor indebted to non-institutional lenders.

The Prime Minister's 15-point programme for the welfare of minorities, seeks that an appropriate percentage of priority sector lending is targeted for minority communities. Minority community includes members from the Muslims, Christians, Sikhs, Buddhists and Parsi communities.

After the meeting, Chidambaram said, "The RBI has agreed to change the master circular on priority sector lending to include five minority communities under lending to weaker section.

Early this year, the government had sent a letter seeking the opinion of both RBI and Indian Banks Association (IBA) on a proposal to earmark 6 per cent of loans to borrowers from minority communities. Both the IBA and RBI had sounded their strong reservations against this.

Hence working a middle path the FM has now directed RBI to widen the definition of weaker section by including minority communities as a segment. At present, commercial banks must lend 40 per cent of loans to farmers and small businessmen who constitute, along with a few other categories as priority sector.

"I am not fixing any target for lending to the minority community. We have identified 103 minority dominated districts and would urge you to open more branches in these districts and increase the flow of credit in these centres," said the Chidambaram to the bankers.

(Courtesy: Business Standard)