RBI Hikes Loan Cap to Rs. 40 cr for Small Exporters

AIMING TO boost credit supply to small exporters, the Reserve Bank on Friday enhanced the loan sanctions limit qualifying as priority sector lending by banks to Rs. 40 crore per borrower.

The limit was capped at Rs. 25 crore per borrower earlier, according to a notification.

It can be noted that the RBI and the government have been taking a slew of measures to spur economic growth, which has dipped to a six-year low. The RBI has also decided to remove the existing criteria of ‘units having turnover of up to Rs. 100 crore' as part of the changes.

The changes have been done "to boost credit to the export sector", the central bank said in the notification.

Priority sector lending is a mandatory requirement under which lenders are required to devote a portion of their advances to empower focused groups of the economy. All sectors put together, this adds up to 42 percent of the total lending for each bank.

Meanwhile, the RBI prescribed a turnaround time (TAT) for banks to settle failed transactions for customers and also notified compensations payable for various types of customer complaints.

The financial compensation should be done suo motu by the bank, without waiting for a complaint or a claim by a customer, the RBI said.

The central bank had first announced a move to harmonise TAT this April for resolving customer complaints and compensation after observing that time taken for resolving customer complaint varies across payment systems.

[RBI/2019-20/66 - FIDD.CO.Plan.BC.12/04.09.01/2019-20 dated 20^th September 2019]

Priority Sector Lending (PSL) – Classification of Exports under priority Sector

In order to boost credit to export sector, it has been decided to effect following changes in para 8 of the “Master Direction on Priority Sector Lending-targets and Classification” dated July 7, 2016 (updated as on December 4, 2018) pertaining to export credit.

i. Enhance the sanctioned limit, for classification of export credit under PSL, from ₹ 250 million per borrower to ₹ 400 million per borrower.

ii. Remove the existing criteria of ‘units having turnover of up to ₹ 1 billion’

2. The existing guidelines for domestic scheduled commercial banks to classify ‘Incremental export credit over corresponding date of the preceding year, upto 2 per cent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher’ under PSL will continue to be applicable subject to the criteria mentioned at (i) above.

3. There is no change in the present instructions in respect of foreign banks.