Mumbai: The Reserve Bank of India (RBI) on Friday asked banks not to include their contingent liabilities and off-balance-sheet items while calculating the so-called priority sector target.
Banks are required to make 40% of their loans to the so-called priority sector. This includes agriculture, exports and other weaker sections of the economy.
The apex bank said it has noticed that some banks are including the exposures mentioned above to fulfil the priority sector obligation.
“We clarify that this is not in conformity with priority sector lending guidelines. Therefore, banks are advised to declassify such accounts with retrospective effect, where a contingent liability/off-balance-sheet item is treated as a part of priority sector target achievement,” RBI said in a notification.