Banking Awareness Question Day 5: RBI Releases Revised Priority Sector Lending Guidelines
The Reserve Bank of India (RBI) on Friday released revised priority sector lending (PSL) guidelines to augment funding for COVID-19 impacted companies.
Bank finance to start-ups (up to Rs 50 crore), loans to farmers for installation of solar power plants for solarisation of grid-connected agriculture pumps and loans for setting up Compressed BioGas plants have been included as fresh categories eligible for finance under priority sector.
- Priority Sector includes the following categories:
(ii) Micro, Small and Medium Enterprises
(iii) Export Credit
(vi) Social Infrastructure
(vii) Renewable Energy
The targets and sub-targets for banks under priority sector are as follows:
Categories Domestic scheduled commercial banks (excluding Regional Rural Banks and Small Finance Banks) and Foreign banks with 20 branches and above Foreign banks with less than 20 branches Total Priority Sector
40 per cent of Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher.
40 per cent of Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher, to be achieved in a phased manner by 2020. Agriculture # 18 per cent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher.
Within the 18 percent target for agriculture, a target of 8 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher is prescribed for Small and Marginal Farmers.
Not applicable Micro Enterprises 7.5 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher. Not applicable Advances to Weaker Sections 10 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher Not applicable # Domestic banks have been directed to ensure that their overall direct lending to non-corporate farmers does not fall below the system-wide average of the last three years achievement.
- Overall PSL Target for Foreign Bank with less than 20 Branches: 40 percent of Adjusted Net Bank Credit to be achieved in a phased manner-
4. For classification under priority sector, no limits are prescribed for bank loans sanctioned to Micro, Small and Medium Enterprises engaged in the manufacture or production of goods under any industry specified in the first schedule to the Industries (Development and Regulation) Act, 1951 and as notified by the Government from time to time. The manufacturing enterprises are defined in terms of investment in plant and machinery under MSMED Act 2006. Download Free Banking Handbook
5. Bank loans to Micro, Small and Medium Enterprises engaged in providing or rendering of services and defined in terms of investment in equipment under MSMED Act, 2006, irrespective of loan limits, are eligible for classification under priority sector, w.e.f. March 1, 2018.
Categorization of MSME according to MSME ACT 2006
Manufacturing Sector (Goods)
|Enterprises||Investment in Plant and Machinery|
|Micro Enterprises||Does not exceed twenty-five lakh rupees|
|Small Enterprises||more than twenty-five lakh rupees but not exceed five crore rupees|
|Medium Enterprises||More than five crore rupees but does not exceed ten crore rupees|
|Enterprises||Investment in Plant and Machinery|
|Micro Enterprises||Does not exceed ten lakh rupees|
|Small Enterprises||more than ten lakh rupees but not exceed two crore rupees|
|Medium Enterprises||More than two crore rupees but does not exceed five crore rupees|
6. Priority sector loans to the following borrowers are eligible to be considered under the Weaker Sections category:-
|(i)||Small and Marginal Farmers|
|(ii)||Artisans, village and cottage industries where individual credit limits do not exceed ₹ 0.1 million|
|(iii)||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)|
|(iv)||Scheduled Castes and Scheduled Tribes|
|(v)||Beneficiaries of Differential Rate of Interest (DRI) scheme|
|(vi)||Self Help Groups|
|(vii)||Distressed farmers indebted to non-institutional lenders|
|(viii)||Distressed persons other than farmers, with loan amount not exceeding ₹ 0.1 million per borrower to prepay their debt to non-institutional lenders|
|(ix)||Individual women beneficiaries up to ₹ 0.1 million per borrower (For UCBs, existing loans to women will continue to be classified under weaker sections till their maturity/repayment.)|
|(x)||Persons with disabilities|
|(xi)||Overdrafts up to ₹ 5000/- under Prdhan Mantri Jan-Dhan Yojana (PMJDY) accounts, provides borrowers’ household annual income dose not exceed ₹ 0.1 million for rural areas ₹ 0.16 million for non-rural areas|
|(xii)||Minority communities as may be notified by Government of India from time to time.|
- Farmers with landholding of up to 1 hectare are considered as Marginal Farmers. Farmers with a landholding of more than 1 hectare and upto 2 hectares are considered as Small Farmers.
- Scheduled Commercial Banks having any shortfall in lending to priority sector
shall be allocated amounts for contribution to the Rural Infrastructure
Development Fund (RIDF) established with NABARD.
- For Renewable Energy, bank loans up to a limit of Rs.15 crore to borrowers for purposes like solar based power generators, etc. For individual households, the loan limit will be Rs.10 lakh per borrower.
- For Housing, banks can provide loans to individuals up to Rs. 28 lakh in metropolitan centres (with population of ten lakh and above) and loans up to Rs. 20 lakh in other centres for purchase/construction of a dwelling unit per family.
- Export credit will be allowed up to 32 percent of ANBC for Foreign banks with less than 20 branches in India.
- For Education, banks can provide loans to individuals for educational purposes including vocational courses upto Rs. 10 lakh for studies in India and Rs. 20 lakh for studies abroad.