Reserve Bank of India (RBI) on 23 April 2015 issued revised guidelines on Priority Sector Lending.
These revised guidelines will replace the existing guidelines issued on 1 July 2014 and became effective from the date of issue.
Main highlights of the revised guidelines
Addition of new Sectors
- In addition to the existing categories, the new guidelines add Medium Enterprises, Social Infrastructure and Renewable Energy under priority sector.
- As a result, the number of categories under priority sector lending are
- Agriculture
- Micro, Small and Medium enterprises
- Export credit
- Education
- Housing
- Social infrastructure
- Renewable energy and others
Other Features of the guidelines
- The distinction between direct and indirect agriculture is dispensed with.
- A target of 8 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher, has been prescribed for Small and Marginal Farmers within agriculture, to be achieved in a phased manner, that is, 7 percent by March 2016 and 8 percent by March 2017.
- 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, that is, 7 percent by March 2016 and 7.5 percent by March 2017.
- 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.
- Foreign Banks with 20 branches and above already have priority sector targets and sub-targets for Agriculture and Weaker Sections, which are to be achieved by 31 March 2018 as per the action plans submitted by them and approved by RBI.
- The sub-targets for Small and Marginal Farmers and Micro Enterprises would be made applicable post 2018 after a review in 2017.
- 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.
- Bank loans to food and agro processing units will form part of Agriculture.
- Export credit up to 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 up to 2 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher.
- The loan limits for housing loans and MFI loans qualifying under priority sector have been revised.
- The priority sector non-achievement will be assessed on quarterly average basis at the end of the respective year from 2016-17 onwards, instead of annual basis as at present.
