(i)
Agriculture
(ii)
Micro, Small and Medium Enterprises
(iii)
Export Credit
(iv)
Education
(v)
Housing
(vi)
Social Infrastructure
(vii)
Renewable Energy
(viii)
Others
II. Targets /Sub-targets for Priority
sector
(i) The
targets and sub-targets set under priority sector lending for all scheduled
commercial banks operating in India are furnished below:
Categories
|
Domestic
scheduled commercial banks
and Foreign
banks with 20
branches
and above
|
Foreign
banks with less than 20 branches
|
Total
Priority
Sector
|
40
% of ANBC or Credit equivalent Amount of OBS(OBS) Exposure, whichever is
higher.
Foreign banks
with 20 branches
and above have to achieve the Target within a maximum period of five
years from April 1, 2013.
|
40 %
of ANBC or Credit Equivalent Amount
of OBS Exposure, whichever is
higher; to be achieved
by 2020
.
|
Agriculture
|
18
% of ANBC or Credit Equivalent Amount of OBS, whichever is higher. Within the
18 % , a target of 8 % is
prescribed for Small
and Marginal Farmers, to
be achieved by Mar’17.
Foreign banks
with 20 branches
or more have to
achieve the Target by 31st Mar’18. The
sub-target as above would
be made applicable post 2018 after a review in 2017.
|
Not
applicable
|
Micro
Enterprises
|
7.5
% of ANBC or Credit Equivalent
Amount
of OBS Exposure, whichever is higher to be achieved
by March 2017.
The
sub-target for Micro Enterprises for foreign banks with 20 branches and above
would be made applicable post 2018 after a review in 2017.
|
Not
Applicable
|
Advances
to
Weaker
Sections
|
10
% of ANBC or Credit Equivalent
Amount
of OBS Exposure, whichever is higher.
Foreign
banks with 20
branches and above have
to achieve the
Weaker Sections Target 31st Mar’18.
|
Not
Applicable
|
(ii)
The Total Priority Sector target of 40 % for foreign banks with less than 20
branches has to be achieved in a phased manner as under:-
YEAR
|
%AGE
|
|
2015-16
|
32
|
|
2016-17
|
34
|
|
2017-18
|
36
|
|
2018-19
|
38
|
|
2019-20
|
40
|
The
additional target of 2% of ANBC each year from 2016-17 to 2019-20 has to be
achieved by lending to sectors other than exports. The sub targets for post
2020, would be decided in due course.
(iii)
The computation of targets will be based on the ANBC or Credit Equivalent
Amount of OBS Exposures, whichever is higher, as on the corresponding date of
the preceding year. For the purpose of calculation of Credit Equivalent Amount
of OBS Exposures, banks may be guided by the Master Circular on Exposure Norms.
Computation of Adjusted Net Bank
Credit (ANBC)
Bank Credit in India.
|
I
|
Bills Rediscounted with RBI and
other approved Financial Institutions
|
II
|
Net Bank Credit (NBC)*
|
III
(I-II)
|
Bonds/debentures
in Non-SLR categories under HTM category+ investments
treated
as PS + Deposits under RIDF and eligible
funds with NABARD,
NHB, SIDBI and
MUDRA Ltd. due to PS shortfall + outstanding PSLCs
|
IV
|
Exemptions
on long-term bonds issued for infrastructure and affordable
housing
|
V
|
Advances extended
in India against
the incremental FCNR
(B)/NRE deposits, qualifying for exemption from CRR/SLR requirements.
|
VI
|
ANBC
|
III+IV-V-VI
|
III. Description of the eligible
categories under priority sector
- Agriculture
Farm credit
|
A.
Loans to individual farmers or group of farmers, directly engaged in Agriculture
and Allied Activities. This will include:
(i) Crop loans and loans for
allied activities.
(ii) Medium and long-term loans
agriculture and allied activities
(iii) Loans for pre and
post-harvest activities of their own farm produce.
(iv) Loans up to ₹ 50
lakh against pledge/hypothecation of agricultural produce (including
warehouse receipts) for a period not exceeding 12 months.
(v)
Loans to distressed farmers indebted to non-institutional lenders.
(vi)
Loans to farmers under the Kisan Credit Card Scheme.
(vii)
Loans to small and marginal farmers for purchase of land for agriculture.
B.
Loans to Corporate farmers, Producer’s organizations,
Companies, partnership firms and co-operatives directly engaged in Agriculture
and Allied activities.
|
Agriculture
infrastructure
|
i) Loans for construction of storage
facilities to store agriculture produce.
ii)
Soil conservation and watershed development.
iii) An aggregate sanctioned
limit of ₹ 100
crore per borrower for plant tissue culture and agri-biotechnology, seed
production, production of bio-pesticides, bio-fertilizer, and vermi
composting.
|
Ancillary
activities
|
(i)
(i)Loan up to Rs.5cr to co-operative
societies for disposing the produce of members.
(ii)Loans
for setting up of Agriclinics and Agribusiness Centres.
(iii)Loans
for Food and Agro-processing up to ₹ 100 crore per borrower.
(iv)Loans to
Custom Service Units who
maintain a fleet
of tractors, bulldozers, well-boring
equipment, threshers, combines,
etc., and undertake farm work
for farmers on contract basis.
(v) Bank loans to PACS, FSS and
LAMPS for on-lending to agriculture.
(vi)
Loans sanctioned to MFIs for on-lending to agriculture
(vii)
Outstanding deposits under RIDF/ NABARD on account of PS shortfall.
|
Small and Marginal Farmers will
include the following:-
-
Farmers with landholding of up to 1
hectare are Marginal Farmers. Farmers with a landholding of more than 1 hectare
and upto 2 hectares are Small Farmers.
-
Landless agricultural labourers, tenant
farmers, oral lessees and share-croppers, whose share of landholding is within
the limits prescribed for small and marginal farmers.
-
Loans to groups of individual Small and
Marginal farmers directly engaged in Agriculture and Allied Activities,
provided banks maintain disaggregated data of such loans.
-
Loans to farmers' producer companies,
and co-operatives of farmers directly engaged in Agriculture and Allied
Activities, where the membership of Small and Marginal Farmers is not less than
75 % by number and their collective land-holding is also not less than 75 % of total
land-holding of the group.
- Micro,
Small and Medium Enterprises (MSMEs)
The
limits for investment in plant and machinery/equipment for manufacturing /
service enterprise are as under:-
Manufacturing Sector Enterprises
|
Investment in plant and machinery
|
Micro Enterprises
|
Does not exceed Rs. 25 lakh
|
Small Enterprises
|
More than Rs. 25 lakh but does not exceed Rs.
5 cr
|
Medium Enterprises
|
More than Rs.5 cr but does not exceed Rs.10
cr
|
Service Sector Enterprises
|
Investment in Equipments
|
Micro Enterprises
|
Does not exceed Rs.10 lakh
|
Small Enterprises
|
More than Rs.10 lakh but does not exceed Rs.2
cr
|
Medium Enterprises
|
More than Rs.2 cr but does not exceed Rs.5
cr
|
Bank loans to
Micro, Small and Medium Enterprises, for both manufacturing and service sectors
are eligible to be classified under the priority sector as per the following
norms:
Manufacturing Enterprises
The Micro, Small
and Medium Enterprises engaged in the manufacture of goods as notified by the
Government from time to time and in terms of investment in plant and machinery.
Service Enterprises
Bank loans as
mentioned above, engaged in providing services and defined in terms of investment
in equipment under MSMED Act.
Khadi and Village Industries
Sector (KVI)
All
loans to units in the KVI sector will be eligible for classification under the
sub-target of 7 % /7.5 % prescribed for Micro Enterprises under priority
sector.
Other Finance to MSMEs
(i)
Loans to entities assisting in the
supply of inputs to and marketing of outputs of artisans, village and cottage
industries.
(ii) Loans
to co-operatives of producers (artisans,
village and cottage industries).
(iii) Loans
sanctioned to MFIs for on-lending to MSME sector.
(iv)
Credit under General Credit Cards
catering to the non-farm entrepreneurial credit needs.
(v)
Outstanding deposits with SIDBI and MUDRA Ltd. on account of priority sector
shortfall.
MSME
units will continue to enjoy the priority sector lending status up to three
years after they grow out of the MSME category concerned.
- Export Credit
The Export Credit extended as per
the details below would be classified as priority sector.
Domestic banks
|
Foreign
banks with 20 branches and above
|
Foreign banks with
less
than 20 branches
|
Wef 1/4/15, incremental credit over
Corresponding date of the preceding
year upto (2 % of ANBC or Credit Equivalent
Amount of OBS Exposure, whichever is higher), subject to a sanctioned limit
up to ₹
25
crore per borrower to units having turnover of up to ₹ 100 crore.
|
Wef 1/4/15, incremental credit
over corresponding date of the preceding year, up to (2 % of ANBC or Credit
Equivalent Amount of OBS Exposure, whichever is higher).
|
Export credit upto 32 % of ANBC
or Credit Equivalent Amount Of OBS Exposure,
whichever is higher.
|
Export
credit includes pre-shipment and post shipment export credit (excluding OBS
items).
- Education
Loans
to individuals for educational purposes including vocational courses upto ₹ 10
lakh irrespective of the sanctioned amount will be considered as eligible for
priority sector.
- Housing
(i) Loan
to individuals
- Loans upto ₹
28 lakh in metro centres and ₹ 20 lakh in other centres
for one dwelling unit per family provided the cost per unit does not
exceed ₹35
lakh and ₹25
lakh respectively.
- Banks should either include housing
loans backed by long term bonds that are exempted from ANBC under priority
sector or take benefit of exemption from ANBC, but not both.
- Loans for repairs up to ₹ 5
lakh in metro centres and up to ₹ 2 lakh in other centres.
- Loans to banks’ own employees will
be excluded.
(ii) Loans
to Govt agency for construction or slum clearance and rehabilitation subject to
a ceiling of ₹ 10
lakh per dwelling unit.
(iii) Loans
for housing projects for economically weaker sections and low income groups, not
exceeding ₹ 10
lakh per unit. The annual income of such families should not exceed ₹ 2
lakh, irrespective of the location.
(iv) Housing
finance companies where NHB has approved refinance, may be granted loans for
the purpose of purchase/construction of units or slum clearance and
rehabilitation, subject to a limit of ₹ 10 lakh per borrower.
Such
loans will be considered under priority sector only to the extent of 5 % of the
bank’s total priority sector lending, on an ongoing basis. The maturity of such
loans should be co-terminus with average maturity of loans extended by HFCs.
Banks should maintain necessary borrower-wise details of the underlying
portfolio.
(vi) Deposits kept with NHB on
account of shortfall in priority sector.
- Social infrastructure
Loans
up to ₹ 5
crore per borrower for building schools, health care facilities, drinking water
facilities and sanitation facilities in Tier II to Tier VI centres.
- Renewable Energy
Loans
upto ₹ 15
crore for solar based power generators, biomass based power generators, wind
mills, micro-hydel plants and for non-conventional energy based public
utilities like street lighting systems and remote village electrification. For
individual households, the limit will be ₹ 10 lakh per borrower.
- Others
Loans upto
₹ 50,000/-
per borrower, individually or in groups (SHG,JLG), provided the individual’s annual
household income in rural areas is upto ₹ 100,000/- and in non-rural areas
is upto ₹
1,60,000/-.
Loans
to distressed persons upto ₹ 100,000/- to prepay their debt to
non-institutional lenders.
Overdrafts
upto ₹
5,000/- under PMJDY provided the borrowers annual household income is upto
₹ 100,000/- for rural areas and ₹ 1,60,000/-
for non-rural areas.
Loans
to State Sponsored Organisations for SC/STs for purchase and supply of inputs
and marketing of outputs by their beneficiaries.
IV. Weaker Sections
PS loans to the following borrowers will be
considered under Weaker Sections category:-
No.
|
Category
|
1
|
Small and Marginal Farmers
|
2
|
Artisans, village and cottage
industries with individual credit
limits upto ₹ 1
lakh
|
3
|
Beneficiaries under NRLM, NULM
and (SRMS)
|
4
|
Scheduled Castes and Scheduled
Tribes
|
5
|
Beneficiaries of Differential
Rate of Interest (DRI) scheme
|
6
|
Self Help Groups
|
7
|
Distressed farmers indebted to
non-institutional lenders
|
8
|
Distressed persons other than
farmers, with loan upto ₹ 1 lakh per borrower to prepay
their debt to non-institutional lenders
|
9
|
Individual women beneficiaries
up to ₹ 1
lakh per borrower
|
10
|
Persons with disabilities
|
11
|
Overdrafts upto ₹ 5,000/- under
PMJDY, provided the borrowers’ annual household income does not exceed
₹
100,000/-
for rural areas and ₹ 1,60,000/- for non-rural areas
|
12
|
Minority communities as may be
notified by Government of India .
|
In States/UTs, where the notified
minority community is in majority, it will not be considered as minority. These
States/UTs are Jammu & Kashmir, Punjab, Meghalaya, Mizoram, Nagaland and
Lakshadweep.
V. Investments by banks in
securitised assets
(i)
Investments by banks in securitised assets, representing loans to priority
sector, except 'others' category, are eligible for classification under
respective categories of priority sector:
(a) the
securitised assets are originated by banks and are eligible for classification
under priority sector prior to securitisation.
(b) The all
inclusive interest charged to the ultimate borrower by the originating entity
should not exceed the Base Rate of the investing bank plus 8 % per annum.
The
investments in securitised assets originated by MFIs, are exempted from this
interest cap as there are separate caps on margin and interest rate.
(ii)
Investments by banks in securitised assets originated by NBFCs, where the
underlying assets are loans against gold jewellery, are not eligible for
priority sector status.
VI. Transfer of Assets through
Direct Assignment /Outright purchases
(i)
Assignments/Outright purchases of assets representing loans under priority
sector, except the 'others' category, will be eligible for classification under
priority sector provided:
(a) the
assets originated by banks which can be classified as priority sector prior to
the purchase and fulfil the RBI guidelines on outright purchase/assignment.
(b) the eligible
loan assets so purchased should not be disposed of other than by way of
repayment.
(c) 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 annum.
The
Assignments/Outright purchases of eligible priority sector loans from MFIs, are
exempted from this interest rate cap as there are separate caps on margin and
interest rate.
(ii) When
the banks out rightly purchase the loan assets to be classified under priority
sector, they must report the amount actually disbursed to the borrowers and not
the premium embedded amount paid to the sellers.
(iii) Such
transactions undertaken by banks with NBFCs, where the underlying assets are
loans against gold jewellery, are not eligible for priority sector status.
VII. Inter Bank Participation
Certificates
Inter
Bank Participation Certificates (IBPCs) bought by banks, on a risk sharing
basis, are eligible for classification priority sector, provided the underlying
assets are eligible to be categorized as such and the banks fulfil the RBI
guidelines on IBPCs.
VIII. Priority Sector Lending
Certificates
The
outstanding priority sector lending certificates will be eligible for
classification under priority sector provided the assets are originated by
banks, and are eligible for classification as priority sector and fulfil the RBI
guidelines on priority sector lending certificates.
IX. Bank loans to MFIs for
on-lending
(a)
Bank credit to MFIs for on-lending to individuals and members of SHGs / JLGs
will be eligible for categorisation as priority sector, provided not less than
85 % of total assets of MFI are in the
nature of “qualifying assets”. In addition, loan extended for income generating
activity, should be not less than 50 % of the total loans given by MFIs.
(b) A
“qualifying asset” shall mean a loan disbursed by MFI, which satisfies the
following criteria:
(i) The
loan to a borrower whose annual household income in rural areas is upto ₹
1,00,000/- and for non-rural areas upto ₹ 1,60,000/-.
(ii)
Loan does not exceed ₹
60,000/- in the first cycle and ₹ 100,000/- in the subsequent cycles.
(iii) Total
indebtedness of the borrower does not exceed ₹ 1,00,000/-.
(iv) Tenure
of loan is not less than 24 months when loan amount exceeds ₹
15,000/- ,with right to borrower to prepay the amount without penalty.
(v)
The loan is without collateral.
(vi) Loan is
repayable by weekly, fortnightly or monthly installments as per borrower’s
choice.
(c) MFIs
should comply with the following caps on margin and interest rate and other
‘pricing guidelines’, to be eligible for classifying these loans under priority
sector.
(i)
Margin cap: The margin cap should not
exceed 10 % for MFIs having loan portfolio exceeding ₹ 100
crore and 12 % for others. The interest cost is to be calculated on average
fortnightly balances of outstanding borrowings and interest income is to be
calculated on average fortnightly balances of outstanding loan portfolio of
qualifying assets.
(ii)
Interest cap on individual loans: Interest
rate on individual loans will be the average Base Rate of five largest
commercial banks by assets multiplied by 2.75 per annum or cost of funds plus
margin cap, whichever is less. The average of the Base Rate shall be advised by
RBI.
(iii) Only
three components are to be included in pricing of loans viz., (a) a processing
fee not exceeding 1 % of the gross loan amount, (b) the interest charge and (c)
the insurance premium.
(iv) The
processing fee is not to be included in the margin cap or the interest cap.
(v)
Only the actual cost of group insurance
for life, health and livestock for borrower and spouse can be recovered;
administrative charges may be recovered as per IRDA guidelines.
(vi) There
should not be any penalty for delayed payment.
(vii)
No Security Deposit/ Margin are to be
taken.
(d) At the end of each quarter, the
banks should obtain from an MFI, a Chartered Accountant’s Certificate stating, that
the criteria on (i) qualifying assets, (ii) the aggregate amount of loan,
extended for income generation activity, and (iii) pricing guidelines are
followed.
X. Monitoring of Priority Sector
Lending targets
The
compliance of banks will be monitored on ‘quarterly’ basis. The data on
priority sector advances has to be furnished by banks at quarterly and annual
intervals as per revised reporting formats.
XI. Non-achievement of Priority Sector
targets
Scheduled
Commercial Banks having shortfall in lending to priority sector shall be
allocated amounts for contribution to RIDF and other Funds with
NABARD/NHB/SIDBI/ MUDRA Ltd. For the year 2015-16, the shortfall will be
assessed based on the position as on March 31, 2016. From financial year
2016-17 onwards, the achievement will be arrived at the end of financial year
based on the average of priority sector target /sub-target achievement as at
the end of each quarter.
The
interest rates on banks’ contribution to RIDF or any other Funds, tenure of
deposits, etc. shall be fixed by RBI.
The
misclassifications reported by the Reserve Bank’s Department of Banking
Supervision would be reduced from the achievement of that year, to which the
amount of misclassification pertains, for allocation to various funds in
subsequent years.
Non-achievement
of priority sector targets will be taken into account while granting regulatory
clearances/approvals for various purposes.
XII. Common guidelines for
priority sector loans
Banks
should comply with the following guidelines for advances under the priority
sector.
1. Rate of interest
The
rates of interest will be as per directives issued by RBI.
2. Service charges
No loan
related charges should be levied on priority sector loans up to ₹
25,000.
A
register should be maintained, wherein the date of receipt,
sanction/rejection/disbursement with reasons, etc., should be recorded.
4. Issue of Acknowledgement of Loan
Applications
Banks
should provide acknowledgement for loan applications received under priority
sector loans. Bank Boards should prescribe a time limit within which the bank
communicates its decision in writing to the applicants.
XIII. Amendments
These guidelines are subject to any further
instructions that may be issued by the RBI.
XIV. Definitions/Clarifications
1. On-lending:
Loans sanctioned by banks to eligible intermediaries for onward lending only
for creation of priority sector assets.
2. Contingent
liabilities/OBS items do not form part of priority sector target achievement.
However, foreign banks with less than 20 branches have an option to reckon the
credit equivalent of OBS items, extended to borrowers for eligible priority
sector activities, along with priority sector loans for the purpose of
computation of priority sector target achievement. In that case, the credit
equivalent of all OBS items (both priority sector and non-priority sector
excluding interbank) should be added to the ANBC in the denominator for
computation of Priority Sector Lending targets.
3. OBS
interbank exposures are excluded for computing Credit Equivalent of OBS
Exposures for the priority sector targets.
4. The
term “all inclusive interest” includes interest (effective annual interest),
processing fees and service charges.
5. Banks
should ensure that loans extended under priority sector are for approved
purposes and the end use is continuously monitored.
Based on the Master
Circular of 1/7/15. Please visit www.rbi.org.in if required…………… Poppy
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