Page 183 - DMGT303_BANKING_AND_INSURANCE

Banking and Insurance

Notes 12. What action is taken in the case of non-achievement of priority sector lending target by a
bank ?
(i) Domestic scheduled commercial banks having shortfall in lending to priority sector/
agriculture are allocated amounts for contribution to the Rural Infrastructure
Development Fund (RIDF) established in NABARD. Details regarding
operationalisation of the RIDF such as the amounts to be deposited by banks, interest
rates on deposits, period of deposits etc., are decided every year after announcement
in the Union Budget about setting up of RIDF.
(ii) In the case of foreign banks operating in India which fail to achieve the priority
sector lending target or sub-targets, an amount equivalent to the shortfall is required
to be deposited with SIDBI for one year at the interest rate of 8 per cent per annum.
13. Whether there is any time limit for disposal of loan applications?

Ans.
(i) All loan applications up to a credit limit of Rs. 25,000 should be disposed of within
a fortnight and those for over Rs. 25,000 within 8 to 9 weeks.

(ii) All loan applications for SSI up to a credit limit of Rs. 25000 should be disposed off
within 2 weeks and those up to Rs. 5 lakh within 4 weeks provided the loan
applications are complete in all respects and accompanied by a check list.
14. What is the rate of interest for loans under priority sector?
Ans. As per the current interest rate policy, in the case of loans up to Rs. 2 lakh, the interest rate
should not exceed the prime lending rate (PLR) of the bank, while in the case of loans
above Rs. 2 lakh, banks are free to determine the interest rate.
15. What are the guidelines for charging of penal interest on PS advances?

Ans. The issue of charging of penal interest that should be levied for reasons such as defaults in
repayment, non-submission of financial statements etc. has been left to the board of each
bank. However, no penal interest is to be levied on PS advances up to Rs. 25000/-.
16. Apprise the guidelines about the service charges and insurance in PS advances.
Ans. No service charges/inspection charges to be levied on PS advances up to Rs. 25000 & for
loans above Rs. 25000 banks are free to levy service charges.
Regarding insurance, banks may waive insurance of assets financed in:
(a) All type of PS advances up to and inclusive of Rs. 10000 for fire and other risks.
(b) Advances to SSI sector up to and inclusive of Rs. 25000 by way of:

(i) Composite loans to artisans, village and cottage industries,
(ii) All term loans,
(iii) Working capital where these are against non-hazardous goods.

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Caution All loan applications up to a credit limit of Rs. 25,000 should be disposed of within
a fortnight and those for over Rs. 25,000 within 8 to 9 weeks.

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