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What are the latest guidelines on Priority sector lending and targets?

What are the latest guidelines on Priority sector lending and targets?


Updated up to :June 6, 2018

Categories under priority sector under revised guidelines:

 As per RBI circular RPCD.CO.Plan.BC10/04.09.01/2014-15 dated July 1, 2014, Medium Enterprises, Social Infrastructure and Renewable Energy will form part of priority sector, in addition to the earlier existing categories like Agriculture,Micro Small enterprises,Export credit,education,housing loan, and others (credit to weaker sections).

The total target and sub-targets set under priority sector lending for all scheduled commercial banks operating in India is 40 per cent of Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher.     The provisions of directions  of RBI on priority sector advances shall apply to every Scheduled Commercial Bank {excluding Regional Rural Banks (RRBs) and Small Finance Banks (SFBs)} licensed to operate in India by the Reserve Bank of India.
[Note: On-lending means loans sanctioned by banks to eligible intermediaries for onward lending only for creation of priority sector assets. The average maturity of priority sector assets thus created should be broadly co-terminus with maturity of the bank loan.Off-balance sheet interbank exposures are excluded for computing Credit Equivalent of Off – Balance Sheet Exposures for the priority sector targets.]

Agriculture: A target of 18 per cent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher has been prescribed for agricultural advance.Within the 18 per cent target for agriculture, a target of 8 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher is prescribed for Small and Marginal Farmers.The distinction between direct and indirect agriculture is now dispensed with.Bank loans to food and agro processing units will form part of Agriculture.Additionally, domestic banks are directed to ensure that the overall lending to non-corporate farmers does not fall below the system-wide average of the last three years achievement.

 MSME: A target of 7.5 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher, has been prescribed for Micro Enterprises, to be achieved in a phased manner.The currently applicable loan limits of ₹ 5 crores and ₹ 10 crores per borrower to Micro and  Small and Medium Enterprises (Services) respectively, for classification under priority sector, is now removed. Consequently, all bank loans to MSMEs, engaged in providing or rendering of services as defined in terms of investment in equipment under MSMED Act, 2006, shall qualify under priority sector without any credit cap.

Weaker Section: There is no change in the target of 10 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher, for Weaker Sections.

Export credit: Incremental export credit over corresponding date of the preceding year, up to 2 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher, effective from April 1, 2015 is classified under priority sector segment subject to a sanctioned limit of up to ₹25 crore per borrower to units having turnover of up to ₹100 crore.

Target for Foreign Banks: Export credit upto 32 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher, will be eligible as part of priority sector for foreign banks with less than 20 branches. For other banks, the incremental export credit over corresponding date of the preceding year will be reckoned upto 2 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher. Foreign banks with less than 20 branches will move to Total Priority Sector Target of 40 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher, on par with other banks by 2019-20, and the sub-targets for these banks, if to be made applicable post 2020, would be decided in due course.

Housing Loan: The loan limits for housing loans and MFI loans qualifying under priority sector have been revised.RBI on Wednesday (06.06.2018) revised the housing loan limits for priority sector lending from existing limit of Rs.28 lakhs to Rs.35 lakhs in Metropolitan Centers provided the overall cost of dwelling unit does not Rs.45 lakhs. The limit for other centers for classification of priority sector lending is increased from existing limit of Rs.20 lakhs to Rs.25 lakhs provided the overall cost of dwelling unit does not Rs.30 lakhs.

The revised guidelines are operational with effect from the date of RBI circular dated April 23, 2015. The priority sector loans sanctioned under the guidelines issued prior to the above date will continue to be classified under priority sector till repayment/maturity/renewal

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