RBI issued revised guidelines on Priority Sector Lending

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
• 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.
• 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.