Loans to startups will now qualify as priority sector lending (PSL) under new central bank guidelines, which are also aimed at boosting credit flow to backward districts, renewable energy projects and healthcare.
Under the new Reserve Bank of India guidelines, loans of as much as ₹50 crore to startups, as defined by the commerce ministry, engaged in agriculture and allied services will be considered priority sector credit. Startups in other segments too shall benefit if the ministry tags them so.
Under new PSL norms, higher weightage will also be assigned to fresh priority sector loans in districts with a low flow of such credit.
“From FY22 onwards, a higher weight (125%) would be assigned to the incremental priority sector credit in the identified districts where the credit flow is comparatively lower (per capita PSL less than ₹6,000), and lower weight (90%) would be assigned for incremental priority sector credit in the identified districts where the credit flow is comparatively higher (per capita PSL greater than ₹25,000),” RBI said.
Banks will continue to report the actual outstanding amount, and the adjustments, based on weightage, will be made by the central bank.
PSL guidelines were last reviewed for commercial banks in April 2015 and for urban cooperative banks in May 2018, respectively.
The central bank said it was making these changes to harmonize various instructions issued to commercial banks, small finance banks, regional rural banks, urban cooperative banks and local area banks.
The changes aim to address regional disparities in the flow of priority sector loans, and districts will now be ranked on the basis of per capita credit flow to priority sector.
RBI also said that the targets prescribed for small and marginal farmers and weaker sections are being increased in a phased manner.
This article was first published on livemint.com.