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2013-05-03

RBI Hikes Cap on MSME Credit, Widens Scope for PSL

The Reserve Bank of India has more than doubled the limit for the Micro Small and Medium Enterprises (MSME) advances to the services sector to Rs 5 crore and announced three changes to the Priority Sector Lending (PSL) norms.

The Reserve Bank of India has more than doubled the limit for the Micro Small and Medium Enterprises (MSME) advances to the services sector to Rs 5 crore and announced three changes to the Priority Sector Lending (PSL) norms.

The RBI proposed an increase in the loan limit for MSMEs in the services sector to Rs 5 crore per borrower from Rs 2 crore earlier, says its annual policy statement.

Similarly, the regulator also suggested an increase in loan limit to Rs 5 crore from the earlier Rs 1 crore in case of lending to dealers/sellers of fertilisers, pesticides, seeds, cattle and poultry feeds, agricultural implements and other inputs, which are classified as indirect finance to the agriculture sector.

It has also been proposed by the policy statement that the limit on pledged loans should be raised from the current Rs 25 lakh to Rs 50 lakh as direct agricultural lending in the case of individual farmers and as indirect agriculture loans in the case of corporates, partnership firms and institutions engaged in agriculture and allied activities.

The reclassifications of the PSL regime have been done according to the feedback by stakeholders regarding the enhancement in certain loan limits to be classified as PSL advances “within the broad contours of the priority sector architecture,” the apex bank said.

According to Governor D Subbarao, detailed guidelines for the same will be issued shortly.

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