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Economy Jul 23, 2012

Priority lending norms will have little impact: Barclays

British lender Barclays' equity research unit said the guidelines on classification of the priority sector lending for banks released last week are only "marginally tougher".

"In our view, these norms are only marginally tougher than the old norms," it said in a note. The changes by having a rate cap on securitisation and assignment routes will limit securitisation activity in the used vehicles and equipment space but not for the new ones, the note said.

Under the revised PSL guidelines released last week, the RBI said for a loan to be classified as PSL, the rate charged to the ultimate borrower by the originator should not exceed the base rate of the bank by 8 percent.

Reuters

Other criteria like capping the home loans at Rs 15 lakh (small cities) and Rs 25 lakh (in big cities) will "not prove onerous" for lenders given the average loans sizes are under Rs 15 lakh.

Similarly, the requirement to cap loans under Rs 10 lakh for small businesses in the services space will also not affect the workings as companies, especially in the investment heavy transport segment, will go to multiple lenders for their requirements, the note says.

It also noted that two potentially adverse recommendations made by the MV Nair committee, on which the guidelines are based, like capping limit on securitisation and having a target on lending to small and marginal farmers, have not been adopted in the final guidelines.

PTI

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