Sunday, December 27, 2015

Regional Rural Banks - Priority Sector Lending – Targets and Classification

CATEGORIES UNDER PRIORITY SECTOR

     i.          Agriculture
ii.          Micro, Small and Medium Enterprises (MSMEs)
iii.          Education
iv.         Housing
v.         Social Infrastructure
vi.         Renewable Energy
vii.         Others

Targets /Sub-targets for Priority sector

Categories
Targets (Of Total Outstanding*)
Total Priority Sector
75%
Agriculture
18%
Small and Marginal Farmers
8%
Micro Enterprises
7.5%
Weaker Sections
15%
Lending to Medium Enterprises, Social Infrastructure and Renewable Energy shall be reckoned for priority sector achievement only up to 15 per cent of total outstanding.

*Total outstanding as on the corresponding date of the preceding year.

Description of the eligible categories under priority sector

1. Agriculture
(i) Farm Credit (short-term crop loans and medium/long-term credit to farmers)
(ii) Agriculture Infrastructure and
(iii) Ancillary Activities.

Farm credit
A. Loans to individual farmers [including SHGs or JLGs], directly engaged in Agriculture and Allied Activities. This will include:

(i)    Crop loans to farmers and loans for allied activities.
(ii)    Medium and 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 developmental loans for allied activities.)

(iii)  Loans to farmers for pre and post-harvest activities and transporting of their own farm produce.

(iv)    Loans to farmers up to Rs.50 lakh against pledge/hypothecation of agricultural produce for a period not exceeding 12 months.

(v)     Loans to distressed farmers indebted to non-institutional lenders.

(vi)   Loans to farmers under Kisan Credit Card Scheme.

(vii) Loans to small and marginal farmers for purchase of land for agricultural purposes.

B. Loans to corporate farmers, farmers' producer organizations/companies of individual farmers, partnership firms and co-operatives of farmers directly engaged in Agriculture and Allied Activities. This will include:

(i) Crop loans to farmers and loans for allied activities.

(ii)  Medium and 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 developmental loans for allied activities.)

(iii)        Loans to farmers for pre and post-harvest activities and transporting of their own farm produce.

(iv)        Loans up to 50 lakh against pledge/hypothecation of agricultural produce         for a period not exceeding 12 months.
Agriculture infrastructure
(i)              Loans for construction of storage facilities to store agriculture produce/products, irrespective of their location.

(ii)             Soil conservation and watershed development.

(iii)          Plant tissue culture and agri-biotechnology, seed production,production of bio-pesticides, bio-fertilizer, and vermi composting.

For the above loans, an aggregate sanctioned limit of 100 crore per borrower, will apply

Ancillary activities
(i)              Loans up to  5 crore to co-operative societies of farmers for disposing of 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 managed by individuals, institutions or organizations who maintain a fleet of tractors, bulldozers, well-boring equipment, threshers, combines, etc., and undertake farm work for farmers on contract basis.


Small and Marginal Farmers will include following:-
-        Landholding of up to 1 hectare - Marginal Farmers
-        More than 1 hectares and up to 2 hectares - Small Farmers.
-        Landless agricultural laborers, tenant farmers, oral lessees and share-croppers.
-        Loans to Self Help Groups (SHGs) or Joint Liability Groups (JLGs), of individual Small and Marginal farmers directly engaged in Agriculture and Allied Activities.
-        Loans to farmers’ producer companies, and co-operatives directly engaged in Agriculture and Allied Activities, where the membership of Small and Marginal Farmers is not less than 75 per cent by number and land-holding share of the total land-holding.

2. Micro, Small and Medium Enterprises (MSMEs)

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 plant and machinery
Micro Enterprises
Does not exceed Rs.10 lakh
Small Enterprises
More 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 or production of goods specified in the first schedule to the Industries (Development and Regulation) Act, 1951 and as notified by the Government. The Manufacturing Enterprises are defined in terms of investment in plant and machinery.

Service Enterprises
Bank loans up to 5 crore per unit to Micro and Small Enterprises and 10 crore to Medium Enterprises engaged in rendering of services and defined in terms of investment in equipment under MSMED Act, 2006.

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 per cent/7.5 per cent prescribed for Micro Enterprise.

Other Finance to MSMEs
(i)  Loans to entities involved in the supply of inputs to and marketing of outputs of artisans, village and cottage industries.
(ii)  Loans to co-operatives of artisans, village and cottage industries.
(iii)   Credit outstanding under General Credit Cards (including Artisan Credit Card, Laghu Udyami Card, Swarojgar Credit Card, and Weaver’s Card etc. catering to the non-farm entrepreneurial credit needs of individuals).

MSME units will continue to enjoy the priority sector lending status up to three years after they grow out of the MSME category concerned.

Overdrafts under PMJDY:
Overdrafts upto 5,000/- under PMJDY will also qualify for target of Micro Enterprises and Weaker Section under Priority Sector Lending.

3. Education

Loans for educational purposes including vocational courses upto 10 lakh irrespective of the sanctioned amount.

4. Housing

(i) Loans up to 20 lakh for purchase/construction, per family provided the overall cost of the dwelling unit is not more than 25 lakh. The housing loans to banks’ own employees will be excluded.
(ii) Loans for repairs up to  2 lakh.
(iii)  Loans to any government agency for construction of dwelling units or for clearance and rehabilitation of slum dwellers subject to a ceiling of 10 lakh per unit.
(iv) Loans sanctioned for housing projects exclusively for economically weaker sections and low income groups, the total cost of which does not exceed 10 lakh per dwelling unit. Economically weaker sections and low income groups is where the family income does not exceed 2 lakh per annum, irrespective of the location.

5. Social Infrastructure

oans up to 5 crore per borrower for building schools, health care facilities, drinking water facilities, sanitation facilities, construction/refurbishment of household toilets and household level water improvements in Tier II to Tier VI centres.

6. Renewable Energy

Bank loans up to a limit of 15 crore for solar based power generators, biomass based power generators, wind mills, micro-hydel plants and for non-conventional energy based public utilities viz. street lighting systems, and remote village electrification. For individual households, the limit will be 10 lakh per borrower.

7. Others

Loans upto 50,000/- per borrower to individuals and their SHG/JLG, provided the borrower’s household income does not exceed 100,000/- in rural areas and 1,60,000/- in non-rural areas.

Loans to distressed persons upto 100,000/- to prepay their debt to non-institutional lenders.

Loans sanctioned to State Sponsored Organisations for Scheduled Castes/ Scheduled Tribes for the specific purpose of purchase and supply of inputs and/or the marketing of the outputs of the beneficiaries.

Weaker Sections

No.
Category
1.
Small and Marginal Farmers
2.
Artisans, village and cottage industries where individual limits do not exceed   1lakh
3.
Beneficiaries under Government Sponsored Schemes such as NRLM, NULM and (SRMS)
4.
SC & ST
5.
Beneficiaries of DRI scheme
6.
Self Help Groups
7.
Distressed farmers indebted to non-institutional lenders
8.
Distressed persons other than farmers, with loan amount not exceeding   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 PMJDYs, provided the borrowers’ household annual 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 except in states where they are in majority (Jammu & Kashmir, Punjab, Meghalaya, Mizoram, Nagaland and Lakshadweep)

Monitoring:

The data on priority sector advances has to be furnished to NABARD at quarterly and annual intervals.

Other Guidelines

RRBs can issue Inter Bank Participation Certificates (IBPCs) to Scheduled Commercial Banks in respect of their priority sector advances in excess of 75 per cent of their outstanding advances.

Common guidelines for priority sector loans

1. Rate of interest
As per directives issued by RBI.

2. Service charges
No service charges should be levied on loans up to  25,000. In case of SHGs/JLGs, the loan limit shall be applicable per member.

3. Receipt, Sanction/Rejection/Disbursement Register
A record should be maintained, wherein the date of receipt, sanction/rejection/disbursement with reasons thereof, etc., should be recorded.

4. Issue of Acknowledgement of Loan Applications
Banks should provide acknowledgement for loan applications received. Banks should prescribe a time limit within which the bank communicates its decision.

Based on RBI Circular dt 03/12/15. Please visit www.rbi.org.in for any further clarification if required…..       Poppy