RBI gives IDBI 5 yrs to meet lending target

The lending norms became applicable to IDBI following the conversion of the erstwhile development finance institution into a commercial bank from October 2004.

The norms require banks to lend 40 per cent of net credit every year to priority sectors including agriculture, weaker sections and housing.

IDBI chairman V P Shetty said RBI has allowed IDBI five years for meeting the priority sector lending norms.

On whether RBI has agreed with IDBI's suggestion that the bank's exposure to infrastructure sectors be considered as priority sector lending, Shetty said "the finer details are yet to be finalised. There was a letter from the RBI and IDBI has responded to it. The details are still to be concluded."

IDBI's total advances as on March 31, 2005 would be over Rs 40,000 crore. IDBI will have to scale up its lending to the priority sectors to be able ensure that its priority sector portfolio is 40 per cent of its total outstanding loans at the end of five years.

ICICI Bank, after it absorbed its parent ICICI in a reverse merger in 2001, was set a 50 per cent target for priority sector lending till it achieved the normal 40 per cent norm on its entire loan portfolio.

ICICI Bank declined to share information on the extent to which it has built up its priority sector portfolio till now.

As a commercial bank, IDBI also has to maintain a cash reserve ratio of 5 per cent of net demand and time liabilities and also invest 25 per cent in government securities to meet statutory liquidity ratio (SLR) norms. IDBI has been allowed a five-year period for achieving the SLR requirements.