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Priority Sector Lending
- Committee under the Chairmanship of Sri. M V Nair was set up by The Reserve Bank of India in August 2011
- To re-examine the existing classification and suggest revised guidelines with regard to Priority Sector lending and related issues
- RBI has issued revised Priority Sector Classification guidelines on 20.07.2012 vide their circular RBI/2012-13/138.RPCD.CO.plan.BC 13/04.09.01/2012-13 operational with immediate effect.
- The priority sector loans sanctioned under the guidelines issued prior to the date of the above RBI circular dated 20.07.2012, will continue to be classified under priority sector till the maturity / renewal of the said loan.
Categories under priority sector
(i) Agriculture
(ii) Micro and Small Enterprises
(iii) Education
(iv) Housing
(v) Export Credit
(vi) Others
Targets
Total Priority Sector:
40% of ANBC or Credit equivalent to off balance sheet exposures as on 31st March of the preceding year.
Agriculture:
18% of ANBC orCredit equivalent to off balance sheet exposures as on 31st March of the preceding year.
Direct agriculture
13.5% of ANBC or Credit equivalent to off balance sheet exposures as on 31st March of the preceding year.
Micro & Small Enterprises
40 percent of total advances to micro and small enterprises sector should go to Micro (manufacturing) enterprises having investment in plant and machinery up to 5 lakh and micro (service) enterprises having investment in equipment up to 2 lakh |
20 percent of total advances to micro and small enterprises sector should go to Micro (manufacturing) enterprises with investment in plant and machinery above 5 lakh and up to 25 lakh, and micro (service) enterprises with investment in equipment above 2 lakh and up to 10 lakh |
The remaining 40% may be lent to Small (manufacturing) enterprises with investment in plant and machinery above 25 lakh and up to 500 lakh, and Small (service) enterprises with investment in equipment above 10 lakh and up to 200 lakhs |
Weaker section:
10% of ANBC or Credit equivalent to off balance sheet exposures as on 31st March of the preceding year.
Description of the Categories under priority sector:
Agriculture:
Loans to individual farmers [including SHGs or JLGs, i.e. groups of individual farmers, provided banks maintain disaggregated data on such loans] engaged in Agriculture and Allied Activities, viz., dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture (up to cocoon stage).
i) Short-term loans to farmers for raising crops, i.e. for crop loans.
This will include traditional/non-traditional plantations, horticulture and allied activities.
(ii) Medium & long-term loans to farmers for agriculture and allied activities (e.g. purchase of agricultural implements and machinery, loans for irrigation and other developmental activities undertaken in the farm, and development loans for allied activities).
(iii) Loans to farmers for pre-harvest and post-harvest activities, viz., spraying, weeding, harvesting, sorting, grading and transporting of their own farm produce.
(iv) Loans to farmers up to 25 lakh against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months, irrespective of whether the farmers were given crop loans for raising the produce or not.
(v) Loans to small and marginal farmers for purchase of land for agricultural purposes.
(vi) Loans to distressed farmers indebted to non-institutional lenders.
(vii) Bank loans to Primary Agricultural Credit Societies (PACS), Farmers’ Service Societies (FSS) and Large-sized Adivasi Multi Purpose Societies (LAMPS) ceded to or managed/ controlled by such banks for on lending to farmers for agricultural and allied activities.
(viii) Loans to farmers under Kisan Credit Card Scheme.
(ix) Export credit to farmers for exporting their own farm produce.
Indirect agriculture
Loans to corporates, partnership firms and institutions engaged in Agriculture and Allied Activities [dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture (up to cocoon stage)] above Rs.2 crore. ( upto Rs. 2 crore to corporates and firms are treated as Direct Agriculture)
- Export credit to corporate, partnership firms and institutions for exporting their own farm produce.
- Loans upto 5 crore to Producer Companies set up exclusively by only small and marginal farmers under Part IXA of Companies Act, 1956 for agricultural and allied activities.
- Bank loans to Primary Agricultural Credit Societies (PACS), Farmers’ Service Societies (FSS) and Large-sized Adivasi Multi Purpose Societies (LAMPS) other than those covered under paragraph III (1.1) (vii) of this circular.
Other indirect agriculture loans
(i) Loans up to 1 crore per borrower to dealers /sellers of fertilizers, pesticides, seeds, cattle feed, poultry feed, agricultural implements and other inputs.
(ii) Loans for setting up of Agriclinics and Agribusiness Centres.
(iii) Loans up to 5 crore to cooperative societies of farmers for disposing of the produce of members.
(iv) Loans to Custom Service Units managed by individuals, institutions or organisations who maintain a fleet of tractors, bulldozers, well-boring equipment, threshers, combines, etc., and undertake farm work for farmers on contract basis.
(v) Loans for construction and running of storage facilities (warehouse, market yards, godowns and silos), including cold storage units designed to store agriculture produce/products, irrespective of their location.
If the storage unit is a micro or small enterprise, such loans will be classified under loans to Micro and Small Enterprises sector.
(vi) Loans to MFIs for on-lending to farmers for agricultural and allied activities as per the conditions specified.
(vii) Loans sanctioned to NGOs, which are SHG Promoting Institutions, for on-lending to members of SHGs under SHG-Bank Linkage Programme for agricultural and allied activities. The all inclusive interest charged by the NGO/SHG promoting entity should not exceed the Base Rate of the lending bank plus eight percent per annum.
(viii) Loans sanctioned to RRBs for on-lending to agriculture and allied activities.
2. Micro and small enterprises
The limits for investment in plant and machinery/equipment for manufacturing / service enterprise, as notified by Ministry of Micro Small and Medium Enterprises, vide, S.O.1642(E) dated September 29, 2006 are as under:- |
Manufacturing sectorEnterprises |
Investment in plant and machinery |
Micro Enterprises |
Do not exceed twenty five lakh rupees |
Small Enterprises |
More than twenty five lakh rupees but does not exceed five crore rupees |
Service Sector |
Enterprises |
Investment in equipment |
Micro Enterprises |
Does not exceed ten lakh rupees |
Small Enterprises |
More than ten lakh rupees but does not exceed two crore rupees |
Service Enterprises
Bank loans up to 2 crore per unit to Micro and Small Enterprises engaged in providing or rendering of services and defined in terms of investment in equipment under MSMED Act, 2006.
Export credit to MSE units (both manufacturing and services) for exporting of goods/services produced by them.
Khadi and Village Industries Sector (KVI)
All loans sanctioned to units in the KVI sector, irrespective of their size of operations, location and amount of original investment in plant and machinery. Such loans will be eligible for classification under the sub-target of 60 percent prescribed for micro enterprises within the micro and small enterprises segment under priority sector.
Indirect Finance
(i) Loans to persons involved in assisting the decentralised sector in the supply of inputs to and marketing of outputs of artisans, village and cottage industries.
(ii) Loans to cooperatives of producers in the decentralised sector viz. artisans village and cottage industries.
(iii) Loans sanctioned by banks to MFIs for on-lending to MSE sector as per the conditions specified in paragraph VIII of this circular.
Education
Loans to individuals for educational purposes including vocational courses upto 10 lakh for studies in India and 20 lakh for studies abroad.
Housing
Loans to individuals for
- up to 25 lakh in metropolitan centres with population above ten lakh and
- 15 lakh in other centres for purchase/construction of a dwelling unit per family
** excluding loans sanctioned to bank’s own employees.
Loans for repairs to the damaged dwelling units of families
- up to 2 lakh in rural and semi- urban areas and
- up to 5 lakh in urban and metropolitan areas.
Bank loans to any governmental agency for construction of dwelling units or for slum clearance and rehabilitation of slum dwellers subject to a ceiling of 10 lakh per dwelling unit.
The loans sanctioned by banks for housing projects exclusively for the purpose of construction of houses only to economically weaker sections and low income groups, the total cost of which do not exceed 10 lakh per dwelling unit.
For the purpose of identifying the economically weaker sections and low income groups, the family income limit of 1,20,000 per annum, irrespective of the location, is prescribed.
Others
a. Loans, upto 50,000 per borrower or Overdraft upto Rs.50,000/- (against No Frills or Basic SB) provided directly by banks to individuals and their SHG/JLG, provided the borrower’s household annual income in rural areas does not exceed 60,000/- and for non-rural areas it should not exceed 1,20,000/-.
b. Loans to distressed persons [other than farmers] not exceeding 50,000 per borrower to prepay their debt to non-institutional lenders.
c. Loans outstanding under loans for general purposes under General Credit Cards (GCC).
Loans sanctioned to State Sponsored Organisations for Scheduled Castes/ Scheduled Tribes for the specific purpose of purchase and supply of inputs to and/or the marketing of the outputs of the beneficiaries of these organisations.
Loans sanctioned by banks directly to individuals for setting up off-grid solar and other off-grid renewable energy solutions for households.
Weaker Sections:
Priority sector loans to the following borrowers will be considered under Weaker Sections category:-
(a) Small and marginal farmers;
(b) Artisans, village and cottage industries where individual credit limits do not exceed 50,000;
(c) Beneficiaries of Swarnjayanti Gram Swarozgar Yojana (SGSY), now National Rural Livelihood Mission (NRLM);
(d) Scheduled Castes and Scheduled Tribes;
(e) Beneficiaries of Differential Rate of Interest (DRI) scheme;
(f) Beneficiaries under Swarna Jayanti Shahari Rozgar Yojana (SJSRY);
(g) Beneficiaries under Scheme for Rehabilitation of Manual Scavengers (SRMS);
(h) Loans to Self Help Groups;
(i) Loans to distressed farmers indebted to non-institutional lenders;
(j) Loans to distressed persons other than farmers not exceeding 50,000 per borrower to prepay their debt to non-institutional lenders;
(k) Loans to individual women beneficiaries upto 50,000 per borrower;
(l) Loans sanctioned under (a) to (k) above to persons from minority communities. In States, where one of the minority communities notified is, in fact, in majority, item (l) will cover only the other notified minorities. These States/Union Territories are Jammu & Kashmir, Punjab, Meghalaya, Mizoram, Nagaland and Lakshadweep.
Small and Marginal Farmers:
Farmers with landholding of up to 1 hectare is considered as Marginal Farmers. Farmers with a landholding of more than 1 hectare but less than 2 hectares are considered as Small Farmers. For the purpose of priority sector loans ‘small and marginal farmers’ include landless agricultural labourers, tenant farmers, oral lessees and share-croppers, whose share of landholding is within above limits prescribed for “Small and Marginal Farmer”.
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