RBI seeks Feedback on ToR for Nair Committee on Priority Sector Lending

The Reserve Bank of India has, through a questionnaire, sought views/comments of all stakeholders on the Terms of Reference for the Nair Committee on Priority Sector Lending . Comments/suggestions/views may be emailed  latest by November 15, 2011. It may be recalled that the Reserve Bank of India had appointed a Committee to re-examine the existing classification and suggest revised guidelines with regard to priority sector lending classification and related issues (Chairman :  Shri M. V. Nair).

Questionnaire on Terms of Reference

1. Is there a case to simplify the approach to Directed lending or do away with the same or ensure a level playing field for all the players?
2. Are there any inconsistencies / ambiguities / interpretational issues in the existing guidelines? List them and suggest modifications.
3. What are the Nature of Activities presently classified as Priority Sector that need relook?
4. Is there any category hitherto not considered under the priority sector, but there are compelling reasons to include the same?
5. What are the activities for which the classification changes depending upon the types of Borrower needs to be relooked?
6. What are the activities for which the classification changes depending upon the Limit of Loan amount need to be revisited?
7. How to ensure that the loans given by banks reach the eligible categories and borrowers? What are present gaps?
8. Which sets of the common guidelines for Priority Sector advances needs special attention / treatment to ensure that the targeted categories are the beneficiaries, at the same time the poorest of the poor are not crowded out?
9. What are the advances presently routed through certain agencies and presently categorized as direct lending under the priority sector which warrant modifications?
10. Are there any categories that are presently categorized as indirect Finance under priority sector, which should be classified as Direct Advances?
11. What are the advances presently routed through various Institutions, by way of on-lending, buy-outs or securitization, that are presently not categorized as PS lending, but could be classified so?
12. What are the pre-conditions that are to be fulfilled, for doing the same?
13. Similarly, are there any sectors / categories of on-lending that are presently categorized as priority sector, which have outlived its need for priority financing?
14. What are the categories of Priority Sector advances for which the benefit of interest caps, Subventions or Subsidies be introduced? What are the pre-conditions to qualify for the same?
15. Is there any category which has the benefit of interest caps, Subventions or Subsidies but has outlived its purpose or not able to fulfill its objective?
16. Whether the current methodology of Penalty for non-achievement of Benchmarks is correct? Are there any specific drawbacks in the existing approach of introduction of these perverse incentives? Are they fulfilling their objectives?
17. Is there a scope for a new methodology of harsher penalties as (like monetary penalty, restriction on Branch licensing etc.) / and can the same co-exist with the existing method or should they replace the existing methodology?
18. Is there a need to have penalties for those categories for which at present there are targets/ benchmarks but no penalties?
19. Is there a need to introduce penalty for erroneous reporting? Suggest a methodology.
20. What are the major constraints observed in the present system of MIS relating to priority sector lending?
21. Does the present reporting system warrant slight modification to the changing needs or a major overhaul is required?
22. What is the technological readiness of various banks’ systems to cope up with the changing reporting needs?
23. With reference to modified Reporting system, what will be timeframe required to implement the modification and is there a need for an interim solution, pending the implementation of the final solution?
24. For impact evaluation, what are the parameters in the different segments under the Priority Sector that are likely to change due to availability of directed credit?
25. What is the acceptable level for each such parameter and where do we stand at present?
26. What is the likely time frame, for directed credit thus made available, to show significant improvement for each parameter in normal course?
27. Whether any benchmark needs to be withdrawn or reduced or increased or introduced? What is the rationale behind the same?
28. Does ANBC calculation methodology necessitate any revision?
29. Whether in current practice, the PS lending is skewed towards urban centres / select states? If so, what can be the remedy for equitable growth?
30. Is DRI scheme still relevant? Suggest modifications for effective implementation of the scheme?

Alpana Killawala
Chief General Manager

Press Release : 2011-2012/659

Source- RBI