Date : Sep 04, 2020
RBI Releases Revised Priority Sector Lending Guidelines
Reserve Bank of India has comprehensively reviewed the Priority Sector Lending (PSL) Guidelines to align it with emerging national priorities and bring sharper focus on inclusive development, after having wide ranging discussions with all stakeholders.
Revised PSL guidelines will enable better credit penetration to credit deficient areas; increase the lending to small and marginal farmers and weaker sections; boost credit to renewable energy, and health infrastructure.
Bank finance to start-ups (up to ₹50 crore); loans to farmers for installation of solar power plants for solarisation of grid connected agriculture pumps and loans for setting up Compressed Bio Gas (CBG) plants have been included as fresh categories eligible for finance under priority sector. Some of the salient features of revised PSL guidelines are:
1. To address regional disparities in the flow of priority sector credit, higher weightage have been assigned to incremental priority sector credit in ‘identified districts’ where priority sector credit flow is comparatively low.
2. The targets prescribed for “small and marginal farmers” and “weaker sections” are being increased in a phased manner.
3. Higher credit limit has been specified for Farmers Producers Organisations (FPOs)/Farmers Producers Companies (FPCs) undertaking farming with assured marketing of their produce at a pre-determined price.
4. Loan limits for renewable energy have been increased (doubled).
5. For improvement of health infrastructure, credit limit for health infrastructure (including those under ‘Ayushman Bharat’) has been doubled.
Chief General Manager
Press Release No. 2020-2021/284
Reserve Bank of India
Master Directions FIDD.CO.Plan.BC.5/04.09.01/2020-21
September 04, 2020
The Chairman / Managing Director/
Chief Executive Officer
[All Commercial Banks including Regional Rural Banks,
Small Finance Banks, Local Area Banks and
Primary (Urban) Co-operative Banks other than Salary Earners’ Banks]
Master Directions – Priority Sector Lending (PSL) – Targets and Classification.
The Priority Sector Lending (PSL) guidelines issued by Reserve Bank of India were last reviewed for Commercial Banks in April 2015 and for UCBs in May 2018 respectively. With an objective to harmonise various instructions issued to Commercial Banks, SFBs, RRBs, UCBs and LABs; align these guidelines with emerging national priorities and bring sharper focus on inclusive development, it was decided to comprehensively review the PSL guidelines. The revised guidelines also aim to encourage and support environment friendly lending policies to help achieve Sustainable Development Goals (SDGs). This review also took into account the recommendations made by the ‘Expert Committee on Micro, Small and Medium Enterprises (Chairman: Shri U.K. Sinha) and the ‘Internal Working Group to Review Agriculture Credit’ (Chairman: Shri M. K. Jain) apart from discussions with all stakeholders. Further, these Master Directions encompass the revised guidelines on PSL for all Commercial banks, RRBs, SFBs, UCBs and LABs and, accordingly, supersede the earlier Master Directions on PSL issued separately for Scheduled Commercial Banks, RRBs, SFBs and guidelines issued for UCBs, respectively. The list of circulars consolidated in these Master Directions is indicated in the Appendix. The Master Directions have been placed on the RBI website www.rbi.org.in.
(Gautam Prasad Borah)
Chief General Manager-in-Charge
|CHAPTER – I: PRELIMINARY|
|1.||Short Title and Commencement|
|CHAPTER – II: CATEGORIES AND TARGETS UNDER PRIORITY SECTOR|
|4.||Categories under Priority Sector|
|5.||Targets /Sub-targets for Priority Sector|
|6.||Computation of Adjusted Net Bank Credit (ANBC)|
|7.||Adjustments for weights in PSL Achievement|
|CHAPTER – III: DESCRIPTION OF ELIGIBLE CATEGORIES UNDER PRIORITY SECTOR|
|9.||Micro, Small and Medium Enterprises (MSMEs)|
|CHAPTER – IV: MISCELLANEOUS|
|17.||Investments by Banks in Securitised Assets|
|18.||Transfer of Assets through Direct Assignment /Outright Purchase|
|19.||Inter Bank Participation Certificates (IBPCs)|
|20.||Priority Sector Lending Certificates (PSLCs)|
|21.||Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for On-Lending|
|22.||Bank loans to NBFCs for On-Lending|
|23.||Bank loans to HFCs for On-Lending|
|24.||Limits on On-Lending|
|25.||Co-origination of loans by Banks and NBFCs|
|26.||Monitoring of Priority Sector Lending Targets|
|27.||Non-achievement of Priority Sector Targets|
|28.||Common guidelines for Priority Sector Loans|
|ANNEX – I A: List of Districts with comparatively high PSL Credit|
|ANNEX – I B: List of Districts with comparatively low PSL Credit|
|ANNEX – II: Indicative list of eligible activities under Agriculture Infrastructure and Ancillary activities|
|ANNEX – III: Indicative list of Permissible Activities under Food Processing Sector as shared by MoFPI|
|ANNEX – IV: Calculation of Priority Sector Achievement|
|APPENDIX – List of Circulars Consolidated|
Master Directions- Reserve Bank of India (Priority Sector Lending –
Targets and Classification) Directions, 2020
In exercise of the powers conferred by Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949, the Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified.
CHAPTER – I
1. Short Title and Commencement
1.1 These Directions shall be called the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2020.
1.2 These Directions shall come into effect on the day they are placed on the official website of the Reserve Bank of India.
The provisions of these Directions shall apply to every Commercial Bank [including Regional Rural Bank (RRB), Small Finance Bank (SFB), Local Area Bank] and Primary (Urban) Co-operative Bank (UCB) other than Salary Earners’ Bank licensed to operate in India by the Reserve Bank of India.
3. Definitions/ Clarifications
3.1 In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below:
3.2 All other expressions, unless defined herein, shall have the same meaning as has been assigned to them under the Banking Regulation Act, 1949 or the Reserve Bank of India Act, 1934 or any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be.
3.3 Banks must ensure that loans extended under priority sector are for approved purposes and the end use is continuously monitored. The banks should put in place proper internal controls and systems in this regard.
CHAPTER – II
CATEGORIES AND TARGETS UNDER PRIORITY SECTOR
4. The categories under priority sector are as follows:
The details of eligible activities under the above categories are specified in Chapter III.
5. Targets /Sub-targets for Priority sector
5.1 The targets and sub-targets set under priority sector lending, to be computed on the basis of the ANBC/ CEOBE as applicable as on the corresponding date of the preceding year, are as under:
|Categories||Domestic commercial banks (excl. RRBs & SFBs) & foreign banks with 20 branches and above||Foreign banks with less than 20 branches||Regional Rural Banks||Small Finance Banks|
|Total Priority Sector||40 per cent of ANBC as computed in para 6 below or CEOBE whichever is higher||40 per cent of ANBC as computed in para 6 below or CEOBE whichever is higher; out of which up to 32% can be in the form of lending to Exports and not less than 8% can be to any other priority sector||75 per cent of ANBC as computed in para 6 below or CEOBE whichever is higher; However, lending to Medium Enterprises, Social Infrastructure and Renewable Energy shall be reckoned for priority sector achievement only up to 15 per cent of ANBC.||75 per cent of ANBC as computed in para 6 below or CEOBE whichever is higher.|
|Agriculture||18 per cent of ANBC or CEOBE, whichever is higher; out of which a target of 10 percent# is prescribed for Small and Marginal Farmers (SMFs)||Not applicable||18 per cent ANBC or CEOBE, whichever is higher; out of which a target of 10 percent# is prescribed for SMFs||18 per cent of ANBC or CEOBE, whichever is higher; out of which a target of 10 percent# is prescribed for SMFs|
|Micro Enterprises||7.5 per cent of ANBC or CEOBE, whichever is higher||Not applicable||7.5 per cent of ANBC or CEOBE, whichever is higher||7.5 per cent of ANBC or CEOBE, whichever is higher|
|Advances to Weaker Sections||12 percent# of ANBC or CEOBE, whichever is higher||Not applicable||15 per cent of ANBC or CEOBE, whichever is higher||12 percent# of ANBC or CEOBE, whichever is higher|
|# Revised targets for Agriculture and SMFs will be implemented in a phased manner as indicated in para 5.2|
5.2 The targets for lending to SMFs and for Weaker Sections shall be revised upwards from FY 2021-22 onwards as follows:
|Categories||Primary Urban Co-operative Bank|
|Total Priority Sector||40 per cent of ANBC or CEOBE, whichever is higher, which shall stand increased to 75 per cent of ANBC or CEOBE, whichever is higher, with effect from March 31, 2024. UCBs shall comply with the stipulated target as per the following milestones:
|Micro Enterprises||7.5 per cent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher|
|Advances to Weaker Sections||12 per cent# of ANBC or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher.|
|# Revised targets for weaker sections will be implemented in a phased manner as indicated below|
|Financial Year||Small and Marginal Farmers target *||Weaker Sections target ^|
|* Not applicable to UCBs
^ Weaker Sections target for RRBs will continue to be 15% of ANBC or CEOBE, whichever is higher.
5.3 All domestic banks (other than UCBs) and foreign banks with more than 20 branches are directed to ensure that the overall lending to Non-Corporate Farmers (NCFs) does not fall below the system-wide average of the last three years’ achievement which will be separately notified every year. The applicable target for lending to the non-corporate farmers for FY 2020-21 will be 12.14% of ANBC or CEOBE whichever is higher. All efforts should be made by banks to reach the level of 13.5 percent of ANBC (erstwhile target for direct lending to agriculture sector).
6. Computation of Adjusted Net Bank Credit (ANBC)
6.1 For the purpose of priority sector lending, ANBC denotes the outstanding Bank Credit in India [As prescribed in item No.VI of Form ‘A’ under Section 42 (2) of the RBI Act, 1934] and computed as follows:
|Bank Credit in India [As prescribed in item No.VI of Form `A’ under Section 42(2) of the RBI Act, 1934]||I|
|Bills Rediscounted with RBI and other approved Financial Institutions||II|
|Net Bank Credit (NBC)*||III(I-II)|
|Outstanding Deposits under RIDF and other eligible funds with NABARD, NHB, SIDBI and MUDRA Ltd in lieu of non-achievement of priority sector lending targets/sub-targets + outstanding PSLCs||IV|
|Eligible amount for exemptions on issuance of long-term bonds for infrastructure and affordable housing as per circular DBOD.BP.BC. No.25/08.12.014/2014-15 dated July 15, 2014||V|
|Advances extended in India against the incremental FCNR (B)/NRE deposits, qualifying for exemption from CRR/SLR requirements, as per the Reserve Bank’s circulars DBOD.No.Ret.BC.36/12.01.001/2013-14 dated August 14, 2013 read with DBOD.No.Ret.BC.93/12.01.001/2013-14 dated January 31, 2014, DBOD mailbox clarification issued on February 6, 2014 and UBD.BPD.(PCB).CIR.No.5/13.01.000/2013-14 dated August 27, 2013 read with UBD.BPD.(PCB).Cir.No.72/13.01.000/2013-14 dated June 11, 2014.||VI|
|Investments made by public sector banks in the Recapitalization Bonds floated by Government of India||VII|
|Other investments eligible to be treated as priority sector (e.g. investments in securitised assets)||VIII|
|Face Value of securities acquired and kept under HTM category under the TLTRO 2.0 (Press Release 2019-2020/2237 dated April 17, 2020 read with Q.11 of FAQ and SLF-MF- Press Release 2019-2020/2276 dated April 27, 2020 and also Extended Regulatory Benefits under SLF-MF Scheme vide Press Release 2019-2020/2294 dated April 30, 2020.||IX|
|Bonds/debentures in Non-SLR categories under HTM category||X|
|For UCBs: investments made after August 30, 2007 in permitted non SLR bonds held under ‘Held to Maturity’ (HTM) category||XI|
|ANBC (Other than UCBs) III + IV- (V+VI+VII) +VIII – IX + X|
|ANBC for UCBs III + IV – VI – IX + XI|
|* For the purpose of priority sector computation only. Banks should not deduct / net any amount like provisions, accrued interest, etc. from NBC.|
6.2 For the purpose of calculation of CEOBE, banks may be guided by the Master Circular on Exposure Norms issued by Department of Regulation, RBI vide DBR.No.Dir.BC.12/13.03.00/ 2015-16 dated July 1, 2015 and as updated from time to time. UCBs may be guided by the relevant provisions of the Master Circular dated July 1, 2015 on ‘Prudential Norms on Capital Adequacy – UCBs’ issued by Reserve Bank of India.
6.3 SFBs may be further guided by Para 6.5 (ii to vii) of the Operating Guidelines for Small Finance Banks issued by Department of Regulation (RBI/2016-17/81 DBR.NBD. No.26/16.13.218/2016-17 dated October 06, 2016), pertaining to treatment of grandfathered loans, for computation of ANBC.
6.4 While calculating Net Bank Credit as above, if banks subtract prudential write off at Corporate/Head Office level, it must be ensured that the credit to priority sector and all other sub-sectors so written off should also be subtracted category wise from priority sector and sub-target achievement. Wherever, investments or any other items which are treated as eligible for classification under priority sector target/sub-target achievement, the same should also form part of Adjusted Net Bank Credit.
6.5 All the banks have to adhere to the respective licencing guidelines and operating guidelines issued by the Department of Regulation, RBI and updated from time to time
7. Adjustments for weights in PSL Achievement
To address regional disparities in the flow of priority sector credit at the district level, it has been decided to rank districts on the basis of per capita credit flow to priority sector and build an incentive framework for districts with comparatively lower flow of credit and a dis-incentive framework for districts with comparatively higher flow of priority sector credit. Accordingly, from FY 2021-22 onwards, a higher weight (125%) would be assigned to the incremental priority sector credit in the identified districts where the credit flow is comparatively lower (per capita PSL less than ₹6000), and a lower weight (90%) would be assigned for incremental priority sector credit in the identified districts where the credit flow is comparatively higher (per capita PSL greater than ₹25,000). The list of both categories of districts is given in Annex IA & IB. This list will be valid for a period up to FY 2023-24 and will be reviewed thereafter. The districts other than those mentioned in Annex IA and IB will continue to have existing weightage of 100%.
The banks should continue to report the actual outstanding amount in QPSA returns as hitherto. Adjustments for weights to incremental PSL credit will be done by RBI, based on reporting of district wise credit flow to FIDD, CO through the ADEPT database. RRBs, UCBs, LABs and foreign banks (including WoS) would be exempted from adjustments of weights in PSL achievement due to their currently limited area of operation/catering to a niche segment.
CHAPTER – III
DESCRIPTION OF ELIGIBLE CATEGORIES UNDER PRIORITY SECTOR
The lending to agriculture sector will include Farm Credit (Agriculture and Allied Activities), lending for Agriculture Infrastructure and Ancillary Activities.
8.1 Farm Credit – Individual farmers
Loans to individual farmers [including Self Help Groups (SHGs) or Joint Liability Groups (JLGs) i.e. groups of individual farmers, provided banks maintain disaggregated data of such loans] and Proprietorship firms of farmers, directly engaged in Agriculture and Allied Activities, viz. dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture. This will include:
8.2 Farm Credit – Corporate farmers, Farmer Producer Organisations (FPOs)/(FPC) Companies of Individual Farmers, Partnership firms and Co-operatives of farmers engaged in Agriculture and Allied Activities
(a) Loans for the following activities will be subject to an aggregate limit of ₹2 crore per borrowing entity:
(b) Loans up to ₹50 lakh against pledge/hypothecation of agricultural produce (including warehouse receipts2) for a period not exceeding 12 months.
(c) Loans up to ₹5 crore per borrowing entity to FPOs/FPCs undertaking farming with assured marketing of their produce at a pre-determined price.
(d) UCBs are not permitted to lend to co-operatives of farmers.
8.3 Agriculture Infrastructure
Loans for agriculture infrastructure will be subject to an aggregate sanctioned limit of ₹100 crore per borrower from the banking system. List of activities is furnished in Annex II.
8.4 Ancillary Services
8.4.1 Following loans under ancillary services will be subject to limits prescribed as under:
8.4.2 Outstanding deposits under RIDF and other eligible funds with NABARD on account of priority sector shortfall.
8.4.3 The eligible activities under ancillary services and food and agro-processing is given in Annex II and Annex III, respectively.
8.5 Small and Marginal Farmers (SMFs)
For the purpose of computation of achievement of the sub-target, Small and Marginal Farmers will include the following:
8.6 Lending by banks to NBFCs and MFIs for on-lending in agriculture
9. Micro, Small and Medium Enterprises (MSMEs)
The definition of MSMEs will be as per Government of India (GoI), Gazette Notification S.O. 2119 (E) dated June 26, 2020 read with circular RBI/2020-2021/10 FIDD.MSME & NFS.BC.No.3/06.02.31/2020-21 read with FIDD.MSME & NFS. BC. No.4/06.02.31/2020-21 dated July 2, 2020, August 21, 2020 respectively on ‘Credit flow to Micro, Small and Medium Enterprises Sector’ and updated from time to time. Further, such MSMEs should be engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 or engaged in providing or rendering of any service or services. All bank loans to MSMEs conforming to the above guidelines qualify for classification under priority sector lending.
9.1 Factoring Transactions (not applicable to RRBs and UCBs)
9.2 Khadi and Village Industries Sector (KVI)
All loans to units in the KVI sector will be eligible for classification under the sub-target of 7.5 percent prescribed for Micro Enterprises under priority sector.
9.3 Other Finance to MSMEs
10. Export Credit (not applicable to RRBs and LABs)
Export credit under agriculture and MSME sectors are allowed to be classified as PSL in the respective categories viz. agriculture and MSME. Export Credit (other than in agriculture and MSME) will be allowed to be classified as priority sector as per the following table:
|Domestic banks / WoS of Foreign banks/ SFBs/ UCBs||Foreign banks with 20 branches and above||Foreign banks with less than 20 branches|
|Incremental export credit over corresponding date of the preceding year, up to 2 per cent of ANBC or CEOBE whichever is higher, subject to a sanctioned limit of up to ₹ 40 crore per borrower.||Incremental export credit over corresponding date of the preceding year, up to 2 percent of ANBC or CEOBE whichever is higher.||Export credit up to 32 per cent of ANBC or CEOBE whichever is higher.|
10.1 Export credit includes pre-shipment and post-shipment export credit (excluding off-balance sheet items) as defined in Master Circular on Rupee / Foreign Currency Export Credit and Customer Service to Exporters issued by Department of Regulation, RBI vide DBR No.DIR.BC.14/04.02.002/2015-16 dated July 1, 2015 and updated from time to time.
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.
12.1 Bank loans to Housing sector as per limits prescribed below are eligible for priority sector classification:
12.2 Loans up to ₹10 lakh in metropolitan centres and up to ₹6 lakh in other centres for repairs to damaged dwelling units conforming to the overall cost of the dwelling unit as prescribed in para 12.1.
12.3 Bank loans to any governmental agency for construction of dwelling units or for slum clearance and rehabilitation of slum dwellers subject to dwelling units with carpet area of not more than 60 sq.m.
12.4 Bank 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.
12.5 Bank loans to HFCs (approved by NHB for their refinance) for on-lending, up to ₹20 lakh for individual borrowers, for purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to conditions specified in para 23 and 24.
12.6 Outstanding deposits with NHB on account of priority sector shortfall.
13. Social Infrastructure
Bank loans to social infrastructure sector as per limits prescribed below are eligible for priority sector classification
13.1. Bank loans up to a limit of ₹5 crore per borrower for setting up schools, drinking water facilities and sanitation facilities including construction/ refurbishment of household toilets and water improvements at household level, etc. and loans up to a limit of ₹10 crore per borrower for building health care facilities including under ‘Ayushman Bharat’ in Tier II to Tier VI centres. In case of UCBs, the above limits are applicable only in centres having a population of less than one lakh.
13.2. # Bank loans to MFIs extended for on-lending to individuals and also to members of SHGs/JLGs for water and sanitation facilities subject to the criteria laid down in paragraph 21 of these Master Directions.
# not applicable to RRBs, UCBs and SFBs.
14. Renewable Energy
Bank loans up to a limit of ₹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 ₹10 lakh per borrower.
The following loans as per the prescribed limits are eligible for priority sector classification:
15.1. Loans not exceeding ₹1.00 lakh per borrower provided directly by banks to individuals and individual members of SHG/JLG, provided the individual borrower’s household annual income in rural areas does not exceed ₹1.00 lakh and for non-rural areas it does not exceed ₹1.60 lakh, and loans not exceeding ₹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.
15.2. Loans to distressed persons [other than distressed farmers indebted to non-institutional lenders] not exceeding ₹1.00 lakh per borrower to prepay their debt to non-institutional lenders.
15.3. 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.
15.4. Loans up to ₹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.
16. Weaker Sections
16.1 Priority sector loans to the following borrowers will be considered as lending under Weaker Sections category:
|(i)||Small and Marginal Farmers|
|(ii)||Artisans, village and cottage industries where individual credit limits do not exceed ₹1 lakh|
|(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 ₹1 lakh per borrower to prepay their debt to non-institutional lenders|
|(ix)||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.)|
|(x)||Persons with disabilities|
|(xi)||Minority communities as may be notified by Government of India from time to time.|
16.2 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.
16.3 In States, where one of the minority communities notified is, in fact, in majority, item (xi) will cover only the other notified minorities. These States/ Union Territories are Punjab, Meghalaya, Mizoram, Nagaland, Lakshadweep and Jammu & Kashmir.
17. Investments by banks in securitised assets (not applicable to RRBs and UCBs)
Investments by banks in ‘securitised assets’, representing loans to various categories of priority sector, except ‘others’ category, are eligible for classification under respective categories of priority sector depending on the underlying assets provided:
18. Transfer of Assets through Direct Assignment /Outright purchase (not applicable to RRBs and UCBs)
Assignment/outright purchase of pool of assets by banks representing loans under various categories of priority sector, except the ‘others’ category, will be eligible for classification under respective categories of priority sector provided:
19. Inter Bank Participation Certificates (IBPCs) (not applicable to UCBs)
20. Priority Sector Lending Certificates (PSLCs)
The outstanding PSLCs bought by banks will be eligible for classification under respective categories of priority sector provided the underlying assets originated by banks are eligible to be classified as priority sector advances and fulfil the Reserve Bank of India guidelines on Priority Sector Lending Certificates issued vide Circular FIDD.CO.Plan.BC.23/04.09.001/2015-16 dated April 7, 2016. SFBs may further be guided by the terms and conditions specified in Para 1.9 of DBR circular No. DBR.NBD.26/16.13.218/2016-17 dated October 6, 2016 on credit risk transfer and portfolio sales/purchases.
21. Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for on-lending (not applicable to RRBs, UCBs, SFBs and LABs)
Bank credit extended to registered NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised SRO for the sector, for on-lending to individuals and also to members of SHGs / JLGs will be eligible for categorisation as priority sector advance under respective categories viz., Agriculture, MSME, Social Infrastructure and Others, provided the MFIs adhere to the conditions prescribed in Chapter II (xx) and Chapter VIII of Master Directions DNBR PD.007 and Chapter II (xx) and Chapter IX of Master Directions DNBR PD.008/03.10.119/2016-17 dated September 1, 2016 and as updated from time to time.
22. Bank loans to NBFCs for on-lending (not applicable to RRBs, UCBs, SFBs and LABs)
Bank credit to registered NBFCs (other than MFIs) for on-lending will be eligible for classification as priority sector under respective categories subject to the following conditions:
The above dispensation shall be valid upto March 31, 2021 and will be reviewed thereafter. However, loans disbursed under the on-lending model will continue to be classified under Priority Sector till the date of repayment/maturity.
23. Bank loans to HFCs for on-lending (not applicable to RRBs, SFBs and LABs)
Bank credit to Housing Finance Companies (HFCs), approved by NHB for their refinance, for on-lending for the purpose of purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to an aggregate loan limit of ₹20 lakh per borrower. Banks should maintain necessary borrower-wise details of the underlying portfolio.
24. Cap on On-lending
Bank credit to NBFCs (including HFCs) for on-lending as applicable in para 22 and 23 above, will be allowed up to an overall limit of five percent of individual bank’s total priority sector lending. Banks shall compute the eligible portfolio under on-lending mechanism by averaging across four quarters, to determine adherence to the prescribed cap.
25. Co-origination of loans by Banks and NBFCs for lending to priority sector (not applicable to RRBs, UCBs, SFBs and LABs)
All commercial banks may engage with NBFCs-ND-SI (hereinafter referred to as NBFC) to co-originate loans for the creation of priority sector assets. The arrangement should entail joint contribution of credit at the facility level, by both lenders. It should also involve sharing of risks and rewards between the bank and the NBFC for ensuring appropriate alignment of respective business objectives, as per the mutually decided agreement between the bank and the NBFC. Detailed guidelines, in this regard, have been issued vide our circular No. FIDD.CO.Plan.BC/08/04.09.01/2018-19 dated September 21, 2018.
26. Monitoring of Priority Sector Lending targets
To ensure continuous flow of credit to priority sector, the compliance of banks will be monitored on ‘quarterly’ basis. The data on priority sector advances is required to be furnished by banks to FIDD, Central Office at quarterly and annual intervals as per the reporting format (quarterly and annual). In respect of RRBs, the data on priority sector advances, in the above format, must be furnished to NABARD at quarterly and annual intervals. In respect of UCBs, the data on priority sector advances in the reporting formats ‘Statement I’ and ‘Statement II (Part A to D)’ shall be furnished at quarterly and annual intervals, to the Regional Office of DoS, RBI.
27. Non-achievement of Priority Sector targets
28. Common guidelines for priority sector loans
Banks should comply with the following common guidelines for all categories of advances under the priority sector.
ANNEX – I A
List of Districts with comparatively high PSL credit
|1||Andaman Nicobar||South Andaman|
|4||Andhra Pradesh||East Godavari|
|9||Andhra Pradesh||Sri Potti Sriramulu Nellore|
|11||Andhra Pradesh||West Godavari|
|19||Dadra Nagar Haveli||Dadra&Nagar Haveli|
|138||Punjab||Sahibzada Ajit Singh Nagar|
|140||Punjab||Shahid Bhagat Singh Nagar|
|194||Uttar Pradesh||Gautam Buddha Nagar|
|196||Uttar Pradesh||Kanpur Nagar|
|202||Uttarakhand||Udham Singh Nagar|
|205||West Bengal||Paschim Bardhaman|
ANNEX – I B
List of Districts with comparatively low PSL credit
|4||Arunachal Pradesh||Dibang Valley|
|5||Arunachal Pradesh||East Kameng|
|6||Arunachal Pradesh||East Siang|
|7||Arunachal Pradesh||Kra Daadi|
|8||Arunachal Pradesh||Kurung Kumey|
|11||Arunachal Pradesh||Lower Dibang Valley|
|12||Arunachal Pradesh||Lower Siang|
|13||Arunachal Pradesh||Lower Subansiri|
|18||Arunachal Pradesh||Upper Siang|
|19||Arunachal Pradesh||Upper Subansiri|
|20||Arunachal Pradesh||West Kameng|
|21||Arunachal Pradesh||West Siang|
|32||Assam||North Cachar Hills|
|35||Assam||West Karbi Anglong|
|69||Chhattisgarh||Dakshin Bastar Dantewada|
|78||Chhattisgarh||Uttar Bastar Kanker|
|121||Meghalaya||East Garo Hills|
|122||Meghalaya||East Jaintia Hills|
|124||Meghalaya||North Garo Hills|
|125||Meghalaya||South Garo Hills|
|126||Meghalaya||South West Garo Hills|
|127||Meghalaya||South West Khasi Hills|
|128||Meghalaya||West Garo Hills|
|129||Meghalaya||West Khasi Hills|
|152||Telangana||Komram Bheem (Asifabad)|
|157||Uttar Pradesh||Ambedkar Nagar|
|167||Uttar Pradesh||Kanpur Dehat|
|169||Uttar Pradesh||Kushi Nagar|
|173||Uttar Pradesh||Sant Kabir Nagar|
ANNEX – II
An indicative list of eligible activities under Agriculture infrastructure and Ancillary activities is given below:
|Agriculture infrastructure||i) Loans for construction of storage facilities (warehouse, market yards, godowns and silos) including cold storage units/cold storage chains designed 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.
iv) Loans for construction of oil extraction/ processing units for production of bio-fuels, their storage and distribution infrastructure along with loans to entrepreneurs for setting up Compressed Bio Gas (CBG) plants.
|Ancillary activities||(i) Loans for setting up of Agri-clinics and Agri-business centres.
(ii) 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.
(iii) Bank loans to Primary Agricultural Credit Societies (PACS), Farmers’ Service Societies (FSS) and Large-sized Adivasi Multi-Purpose Societies (LAMPS) for on-lending to agriculture.
(iv) Loans sanctioned by banks to MFIs for on-lending to agriculture sector as per the conditions specified in paragraph 21 of these Master Directions.
(v) Loans sanctioned by banks to registered NBFCs (other than MFIs) as per conditions specified in paragraph 22 of these Master Directions.
ANNEX – III
Indicative list of Permissible Activities under Food Processing Sector as shared by Ministry of Food Processing Industries (MoFPI)
ANNEX – IV
Priority Sector achievement – Calculation of shortfall / excess
Tables No.1 and 2 below illustrate the method followed for computation of shortfall / excess in priority sector target achievement at the end of the financial year under the revised PSL guidelines.
|Amount in ₹ crore|
|Quarter ended||PSL targets
|Priority Sector Amount Outstanding
|Adjustments for weightage on incremental credit to identified districts as per para 7 of MD
|Shortfall / Excess
|Amount in ₹ crore|
|Quarter ended||PSL targets
|Priority Sector Amount Outstanding
|Adjustments for weightage on incremental credit to identified districts as per para 7 of MD
|Shortfall / Excess
In the example given in Table – 1, the bank has overall shortfall of ₹2063 crore at the end of the financial year. In Table – 2, the bank has overall excess of ₹2293 crore at the end of the financial year.
The Adjustments due to weightage on incremental credit in identified districts as per para 7, will be as per the data submitted by banks in the Automated Data Extraction Project (ADEPT).
The same method will be followed for calculating the achievement of quarterly and yearly priority sector sub-targets.
Note: The computation of priority sector targets/sub-targets achievement will be based on the ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposures, whichever is higher, as at the corresponding date of the preceding year.
LIST OF CIRCULARS CONSOLIDATED
|Sr. #||Circular No.||Date||Subject|
|1.||DOR (PCB).BPD.Cir.No.12/09.09.002/2019-20||April 24, 2020||Non-achievement of Priority Sector Lending Targets by Primary (Urban) Co-operative Banks (UCBs) – Contribution to the Rural Infrastructure Development Fund (RIDF) and other funds|
|2.||FIDD.CO.Plan.BC.No.19/04.09.01/2019-20||March 23, 2020||Priority Sector Lending – Lending by banks to NBFCs for On-Lending|
|5.||FIDD.CO.Plan.BC.12/04.09.01/2019-20||September 20, 2019||Priority Sector Lending (PSL)-Classification of Exports under Priority Sector|
|6.||FIDD.CO.Plan.BC.No.11/04.09.01/2019-20||September 19, 2019||Priority Sector Targets- Lending to Non-Corporate Farmers-FY 2019-20|
|7.||FIDD.CO.Plan.BC 7/04.09.01/2019-20||August 13, 2019||Priority Sector Lending – Lending by banks to NBFCs for On-Lending|
|8.||Master Directions FIDD.CO.Plan.BC No.08/04.09.01/2019-20||July 29, 2019 (Updated as on March 12, 2020)||Master Directions – Priority Sector Lending – Small Finance Banks – Targets and Classification|
|9.||FIDD.CO.Plan.BC.18 /04.09.01/2018-19||May 06, 2019||Priority Sector Lending – Targets and Classification|
|10.||Letter to Indian Banks’ Association No. FIDD.CO.Plan.772/04.09.001/2018-19||October 4, 2018||Exemption of Special GOI Securities issued to Public Sector Banks from Adjusted Net Bank Credit (ANBC)|
|11.||FIDD.CO.Plan.BC. 08/04.09.01/2018-19||September 21, 2018||Co-origination of loans by Banks and NBFCs for lending to priority sector|
|12.||FIDD.CO.Plan.BC.07/04.09.01/2018-19||July 10, 2018||Priority Sector Lending – Targets and Classification: Lending to non-corporate farmers – System wide average of last three years|
|13.||FIDD.CO.Plan.BC.22/04.09.01/2017-18||June 19, 2018||Priority Sector Lending – Targets and Classification|
|14.||DCBR.BPD (PCB).Cir.No.07/09.09.002/2017-18||May 10, 2018||Revised guidelines on lending to Priority Sector for Primary (Urban) Co-operative Banks (UCBs)|
|15.||FIDD.CO.Plan.BC.18/04.09.01/2017-18||March 1, 2018||Priority Sector Lending – Targets and Classification|
|16.||FIDD.CO.Plan.BC.16/04.09.01/2017-18||September 21, 2017||Priority Sector Lending – Targets and Classification: Lending to non-corporate farmers – System wide average of last three years|
|17.||FIDD.CO.SFB.No.9/04.09.001/2017-18||July 6, 2017||Small Finance Banks – Compendium of Guidelines on Financial Inclusion and Development|
|18.||FIDD.CO.Plan.BC.No.17/04.09.001/2016-17||October 6, 2016||Priority Sector Lending – Revised Reporting System|
|19.||DBR.NBD.No.26/16.13.218/2016-17||October 6, 2016||Operating Guidelines for Small Finance Banks|
|20.||Master Directions DNBR PD.007 and 008/03.10.119/2016-17||September 1, 2016 (updated as on February 17, 2020)||Master Directions 2016-NBFC-Non-SI-Non-deposit taking and SI-Non-Deposit and Deposit taking Company, respectively|
|21.||FIDD.CO.Plan.BC.No.14/04.09.001/2016-17||September 1, 2016||Priority Sector Lending-Targets and Classifications: Lending to Non-corporate Farmers – System Wide Average of last three years|
|22.||FIDD.CO.Plan.BC.No.10/04.09.001/2016-17||August 11, 2016||Priority Sector Lending Status for Factoring Transactions|
|23.||FIDD.CO.Plan.BC.No.8/04.09.001/2016-17||July 28, 2016||PSL-Targets and Classification – Bank loans to MFIs for on-lending- Qualifying asset – Revised loan limit|
|24.||Master Directions FIDD.CO.Plan.2/04.09.01/2016-17||July 07, 2016 (Updated as on June 18, 2019)||Master Directions – Regional Rural Banks – Priority Sector Lending – Targets and Classification|
|25.||FIDD.CO.Plan.BC.23/04.09.01/2015-16||April 7, 2016||Priority Sector Lending Certificates|
|26.||DBOD Mailbox clarification||March 28, 2016||Bank loans to proprietorship under Priority Sector|
|27.||DBOD Mailbox clarification||March 17, 2016||Eligibility of IBPC as Priority Sector Asset|
|28.||FIDD.CO.Plan.BC.No.14/04.09.01/2015-16||December 03, 2015||Regional Rural Banks – Priority Sector Lending – Targets and Classification|
|29.||DBOD Mailbox clarification||November 27, 2015||Bank loans to SHGs/ JLGs- Processing Charges|
|30.||FIDD.CO.Plan.BC.13/04.09.01/2015-16||November 18, 2015||Priority Sector Lending-Targets and Classification|
|31.||DBOD Mailbox clarification||September 7, 2015||Calculation of shortfall/ excess|
|32.||DBOD Mailbox clarification||August 14, 2015||Social Infrastructure and Bank loans to MFIs for on-lending – Social Infrastructure|
|33.||FIDD.CO.Plan.BC.08/04.09.01/2015-16||July 16, 2015||Priority Sector Lending –Targets and Classification|
|34.||DBOD Mailbox clarification||June 26, 2015||Outstanding deposits with MUDRA Ltd. On account of priority sector shortfall|
|35.||DBOD Mailbox clarification||June 12, 2015||Loans to Minority Communities|
|36.||DBOD Mailbox clarification||June 11, 2015||Loans to Custom Service Units|
|37.||FIDD.CO.Plan.BC.54/04.09.01/2014-15||April 23, 2015||Priority Sector Lending-Targets and Classification|
|38.||DCBR.BPD.(PCB) Cir.No. 7/14.01.062/2014-15||March 19, 2015||Priority Sector Lending – Persons with Disabilities (PwD) – Inclusion under Weaker Sections|
|39.||DCBR.BPD.(PCB) Cir.No. 5/14.01.062/2014-15||February 18, 2015||Credit Facilities to Minority Community – Inclusion of Jain Community under Section 2© of National Commission of Minorities (NCM) Act, 1982|
|40.||UBD.BPD.(PCB).Cir.No.72/13.01.000//2013-14||June 11, 2014||Section 42(1) of the Reserve Bank of India Act, 1934 and Section 18 & 24 of the Banking Regulation Act, 1949 (AACS)- FCNR (B)/NRE deposits – Exemption from Maintenance of CRR/SLR and Exclusion from ABC for Priority Sector Lending|
|41.||UBD.CO.BPD.(PCB).Cir.No.13/09.22.010/2013-14||September 10, 2013||Finance for Housing Schemes – Primary (Urban) Co-operative Banks – Loans for Repairs / Additions / Alterations – Enhancement of Limits|
|42.||UBD.BPD.(PCB).CIR.No.5/13.01.000/2013-14||August 27, 2013||Section 42(1) of the Reserve Bank of India Act, 1934 and Section 18 and 24 of the Banking Regulation Act, 1949 (AACS) – FCNR (B) / NRE Deposits – Exemption from Maintenance of CRR / SLR and Exclusion from ABC for Priority Sector Lending|
|43.||UBD.BPD.(PCB).CIR.No.33/09.09.001/2011-12||May 18, 2012||Priority Sector Lending -Indirect Finance to Housing Sector.|
|44.||UBD.BPD.(PCB)CIR.No.50/13.05.000(B)/2010-11||June 2, 2011||Financing of Self Help Groups (SHGs) and Joint Liability Groups (JLGs) by Primary (Urban) Co-operative Banks (UCBs)|
|45.||UBD.CO.BPD.No.70/09.09.001/2009-10||June 15, 2010||Advances to MSEs engaged in exports and export credit to agriculture / allied activities|
|46.||UBD.BPD(PCB).Cir.No.50/09.09.01/2009-10||March 25, 2010||Categorisation of activities under Services|
|47.||UBD.PCB.Cir.No.26/09.09.001/07-08||November 30, 2007||Priority Sector lending-Revision of target – UCBs|
|48.||UBD.PCB.Cir.No.11/09.09.01/07-08||August 30, 2007||Revised Guidelines on Lending to Priority Sector for UCBs|
|49.||UBD.PCB.Cir.No.11(126A)/09.09.001/2007-08||August 30, 2007||Priority Sector Advances – List of minority Concentrated Districts|
1 Includes negotiable warehouse receipt (NWR) and electronic negotiable warehouse receipt (e-NWR)
2 Includes negotiable warehouse receipt (NWR) and electronic negotiable warehouse receipt (e-NWR)