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Priority Sector Lending
by Waman Gokhale, Former Deputy General Manager, Central Bank of India.

 

(Reserve Bank of India has mandated all banks to give certain portions of their total loans and advances to the Priority Sector. There are different mandates for different types of banks, viz:

  1. Domestic Commercial Banks & Foreign Banks with 20 branches  and Above
  2. Foreign Bank with less than 20 branches
  3. Regional Rural Bank
  4. Small Finance Bank

In this article, we shall be limiting our discussion on Priority Sector targets applicable for the first type, i.e., Domestic Commercial Banks & Foreign Banks with 20 branches  and Above)

 

Category of Loans covered under priority sector

  • Agriculture
  • Micro, Small & Medium Enterprises
  • Export Credit
  • Education
  • Housing
  • Social Infrastructure
  • Renewal Energy
  • Weaker section
  • Others

Targets /Sub Targets for Priority sector

Categories

Domestic Commercial Banks & Foreign Banks with 20 branches  and Above

Total Priority Sector

40% of ANBC or CEOBE

Whichever is higher

Agriculture

18% of ANBC or CEOBE

(A target of 10% is prescribed for Small and Marginal Farmers)

Micro Enterprises

7.5% of ANBC or CEOBE which ever is higher

Advances to weaker section

12% *of ANBC or CEOBE which ever is higher

* Revised targets for Agriculture and SMFs will be implemented in phased manner

*ANBC : Adjusted Net Bank Credit

*CEOBE : Credit Equivalent of Off Balance Sheet Exposure 

 

Small and Marginal Farmers 


For the purpose of computation of achievement of the sub-target, Small and Marginal farmers are defined as:-  

  •  Farmers with land holding of up to 1 hectare (Marginal Farmers).
  •  Farmers with a landholding of more than 1 hectare and up to 2 hectares (Small Farmers). 
  • Landless agricultural labourers, tenant farmers, oral lessees and sharecroppers whose share of landholding is within the limits prescribed for SMFs. 
  • Loans to Self Help Groups (SHGs) or Joint Liability Groups (JLGs), i.e. groups of individual SMFs directly engaged in Agriculture and Allied Activities, provided banks maintain disaggregated data of such loans.
  •  Loans up to ₹2 lakh to individuals solely engaged in Allied activities without any accompanying land holding criteria. 

Education

Loans to individuals for educational purposes, including vocational courses, not exceeding ₹ 20 lakh will be considered as eligible for priority sector classification. Loans currently classified as priority sector will continue till maturity.

 

Housing Loan 

  • Up to Rs 35 lakh in metropolitan centres (with population of ten lakh and above) and up to Rs 25 lakh in other centres  per family provided the overall cost of the dwelling unit in the metropolitan centre and at other centres does not exceed Rs 45 lakh and Rs 30 lakh respectively
  • Housing loans to banks’ own employees will not be eligible for classification under the priority sector. 
  • Loans up to Rs 10 lakh in metropolitan centres and up to Rs 6 lakh in other centres for repairs -subject to the overall cost of the dwelling unit.
  •  Loans to governmental agency for construction of dwelling units - subject to dwelling units with carpet area of not more than 60 sq.m.
  •  Loans for affordable housing projects using at least 50% of FAR/FSI for dwelling units with carpet area of not more than 60 sq.m.
  •  Loans to Housing Finance Companies  for on-lending, up to Rs 20 lakh for individual borrowers, 
  •  Outstanding deposits with National Housing Bank on account of priority sector shortfall. 

Social Infrastructure

  • Loans up to  Rs 5 crore  for setting up schools, drinking water facilities and sanitation facilities including construction/ refurbishment of household toilets and water improvements at household level. 
  • Loans up to  Rs 10 crore  for building health care facilities including under ‘Ayushman Bharat’ in Tier II to Tier VI centres.
  • Loans to MFIs extended for on-lending to individuals and also to members of SHGs/JLGs for water and sanitation facilities

Renewal Energy

Loans up to a limit of Rs 30 crore to borrowers for purposes like 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 etc., will be eligible for Priority Sector classification. 

For individual households, the loan limit will be Rs 10 lakh per Borrower

 

Others

  • Loans upto  Rs 1.00 lakh per borrower – provided  borrower’s household annual income in rural areas does not exceed Rs 1.00 lakh and for non-rural areas it does not exceed Rs 1.60 lakh
  • Loans not exceeding Rs 2.00 lakh provided directly by banks to SHG/JLG for activities other than agriculture or MSME, viz., loans for meeting social needs, construction or repair of house, construction of toilets or any viable common activity started by the SHGs.
  •  Loans to distressed persons - not exceeding Rs 1.00 lakh per borrower 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 of these organisations. 
  • Loans up to Rs 50 crore to Start-ups, as per definition of Ministry of Commerce and Industry, Govt. of India that are engaged in activities other than Agriculture or MSME.

Weaker Section

For the purpose of Priority Sector Loans, following categories of persons are to be categorized under weaker section:-

1

Small and Marginal Farmers 

2

Artisans, village and cottage industries where individual credit limits do not exceed Rs 1 lakh 

3

Beneficiaries under Government Sponsored Schemes such as National Rural Livelihood Mission (NRLM), National Urban Livelihood Mission (NULM) and Self Employment Scheme for Rehabilitation of Manual Scavengers (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 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 (For UCBs, existing loans to women will continue to be classified under weaker sections till their maturity/repayment.

10

Persons with disabilities 

11

Minority communities may be notified by the Government of India from time to time. 

12

Overdraft availed by PMJDY account holders as per limits and conditions prescribed by Department of Financial Services, Ministry of Finance from time to time may be classified under Weaker Sections.

 

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