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Informist, Tuesday, Jun. 24, 2025

 

NEW DELHI – In a deregulated world, the Reserve Bank of India should let commercial banks decide their priority sector lending allocation instead of the central bank deciding for them, Punjab National Bank Managing Director and Chief Executive Officer Ashok Chandra said Tuesday. Under the RBI's latest norms, commercial banks are required to set aside 40% of their adjusted net bank credit for priority sectors.

According to Chandra, presently all big banks are cognizant of the importance of lending to priority sectors like the micro, small and medium enterprises and also have adequate liquidity to carry out funding to them. "So, on our own, definitely, we can decide (on how much each bank will lend to priority sectors), and we can provide something for that particular activity," Chandra said, speaking at Exim Bank's Trade Conclave in New Delhi. "I am of the view that in the deregulated scenario, we should not see that RBI is going to prescribe certain further things."

 

However, the RBI can continue to have a view on what can be considered as a priority sector, Chandra said. He said that besides having a dialogue on this at an individual level, the Indian Banks' Association will also take up the matter with the regulator. According to the RBI, there are eight sub-categories under priority sector – agriculture, MSME, export credit, education, housing, social infrastructure, renewable energy and some weaker sections.

 

Currently, it is more important to raise awareness among small-ticket borrowers to actually avail loans that banks are "today happy to lend, collataral free", the state-owned bank's chief said. He suggested that the RBI should consider raising the limit of loans that can be sanctioned under each priority sector category and perhaps look at doubling them to increase credit outflow.

 

At the end of 2024-25 (Apr-Mar), Punjab National Bank's priority sector lending totalled 40.36% of its adjusted net bank credit, marginally higher than the central bank's mandate. The New Delhi-based lender's net profit more than doubled to INR 166.30 billion in FY25, on a 14.8% growth in total income to INR 1.38 trillion. The bank's growth in net interest income was more subdued at 6.7% on year to INR 427.82 billion.  End

 

Reported by Priyasmita Dutta and Sagar Sen

Edited by Ashish Shirke

 

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