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4.34 If the government does desire to provide relief in any form to the small farmer, it would be best carried out as a direct
benefit transfer (DBT) to the bank account of the farmer and not through the mechanism of either interest subvention or
debt waiver. This would ensure that the banking system is able to price loans in a sustainable manner and also protect credit
discipline amongst its borrowers. Adding a universal requirement to report all defaults to credit bureaus would ensure that
the borrower also builds a strong interest in protecting his credit history, even if he is a recipient of DBTs.
4.35 In order to guard against large scale defaults resulting from catastrophic events, banks should be permitted to work closely
with insurance companies to purchase bank-wide portfolio level insurance against events such as large scale rainfall failure on
a regional or national basis, instead of having an expectation that relief would be provided from national or state budgets.
4.36 For the provision of food-credit, Food Corporation of India (FCI) and State Governments should be required to originate
warehouse receipts and raise low-cost funds in the market against these receipts instead of being reliant only on bank credit.
4.37 The stipulation that the all-inclusive interest charged to the ultimate borrower by the originating entity should not exceed
the Base Rate of the purchasing bank plus 8 per cent per annum should be removed.
4.38 The RBI should represent to the Government of India to restore the tax-free status of securitisation SPVs as pass-through
vehicles for tax treatment so as to create pathways for Wholesale Banks to provide liquidity to other Banks and Financial
Institutions directly originating assets in priority sectors.
4.39 While a market that trades PSL assets will be of critical importance, regulation should additionally enable the use of risk-free
PSL Certificates as a means to achieving PSL compliance amongst banks that wish to do so.
4.40 In order to enable greater regional and sectoral specialisation among Banks, the Committee recommends that the RBI
revise the PSL targets and require banks to meet an Adjusted PSL target of 50 per cent against the current requirement of
40 per cent. Districts and sectors are weighted based on the difficulty in lending to them, and a Bank lending to a difficult
sector in a difficult to reach district can benefit from a multiplier value based on the specific sector and district. Every sector-
district combination has a weight associated with it and the Bank will have to reach an adjusted PSL value of 50% taking
these weightages into account.
4.41 The Committee recommends that RBI seriously examine moving to a new framework in which two parameters: District
level credit depth, and sector and sub-sector level credit depth be used to determine the sector, sub-sector, and regional
weights which are published every three years. Using these weights banks would be required to reach an Adjusted PSL target
of 150 per cent of ANBC. Executive Summary and List of Recommendations.
4.42 There is a need to develop a robust legal and regulatory framework around customer data generated in various transactions
(payments and credit, digital and off-line), with the objective of customer ownership of their own transactions data and its
use, among others, for signalling credit-worthiness. RBI should constitute a Working Group comprising TRAI, CERC, and
Credit Information Companies to develop a framework for sharing of data between telecom companies, electrical utilities,
and credit bureaus. This framework should be in keeping with the FSLRC‘s draft Indian Financial Code which recommends
the creation of regulations on the collection, storage, modification and protection of personal information by financial
services providers; and establishment of mechanisms to ensure that consumers have access to, and are given an effective
opportunity to seek modifications to, their personal information.
4.43 Universal reporting to credit bureaus should be mandated for all loans, both individual and SME, but in particular SHG
loans, Kisan Credit Card, and General Credit Card.
4.44 Equity investments by banks in complementary infrastructure within the purview of PSL guidelines, such as rural warehouses,
market yards, godowns, silos, and NBFCs in low financial depth districts. These equity investments should be eligible for
contribution to the overall priority sector lending targets. They should be permitted where debt already qualifies for PSL but
with a multiplier of four, to reflect the higher risk and the illiquid character of these investments. The benefit must accrue as
long as the equity investment is held by the Bank. This list of eligible equity investments may be varied from time-to-time.
4.46 RBI needs to write to each of the State Governments expressing its support for the recommendations of both the PLATINUM
Group and the Rajan Committee (2009) and urge them to implement those ideas by pointing out the potential benefits to
the expansion of banking and financial activity in their respective states.
4.47 Banks and Financial Institutions should be required to verify the land records of their clients at the time of making loans and
in those states where this is possible, to insist that transfers take place before a loan can be renewed for a second time.
4.48 Equity investments by banks in private companies engaged in the task of installing and operating weather stations, or in
creating markets for second-hand assets should be eligible for PSL treatment. These investments should also get a multiplier
of four, to reflect the higher risk and the illiquid character of these investments.
