Giving some relief to priority sector, the Reserve Bank of India (RBI) Friday asked some foreign banks, like Citi Bank and Standard Chartered Bank, to divert their 40 percent loans to priority sector, reports media.

While issuing the revised guidelines on priority sector lending targets, the Reserve Bank said foreign banks with branch network of 20 and above will have to abide by the priority sector lending target, which has been retained at 40 percent of their total advances.

"Foreign banks having 20 or more branches in the country will be brought on par with domestic banks for priority sector targets in a phased manner over a maximum period of 5 years starting April 1, 2013," it said.

For smaller lenders, the target remains at 32 percent. Typically, these include small value loans to farmers for agriculture and allied activities, micro and small enterprises, housing for poor, education and other low income groups and weaker sections.

Priority sector lending will also include loans to micro and small service enterprises up to Rs 1 crore and all loans to micro and small manufacturing enterprises will be considered priority sector lending.

RBI also said education and home loans up to the specified limits, and advances to individuals for up to Rs 50,000 to clear debts of money lenders, will be treated as priority lending.

Standard and Charterd Bank, Citi Bank, HSBC and Royal Bank of Scotland have more than 20 branches in India.

These banks will be required to submit an action plan for achieving the targets over a specific time frame to be approved by the central bank, RBI said.

In the home loan segment, RBI said advances of up to Rs 25 lakh in cities with population of over 10 lakh, and Rs 15 lakh in other towns, will be treated as priority lending.

Earlier, all loans up to Rs 25 lakh for purchase and construction of dwelling units constituted priority lending.

The focus of the revised guidelines, based on recommendations of the MV Nair-led panel, is also on direct lending by banks and not through intermediaries like Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs), the RBI said.

To meet credit needs of large sections of the population who had no access to institutional finance, RBI had created the framework of priority sector lending with mandated targets. The priority sectors get timely and adequate credit, RBI said in its guidelines.