What changed
RBI decided that banks' investments in securitised assets representing direct lending to the SSI sector will be treated as direct lending to SSI under priority sector. This is effective from October 26, 2004, as announced in the Mid-Term Review of the Annual Policy Statement.
What it means for you
Banks can now meet their priority sector lending targets for SSI by investing in securitised pools of SSI loans, not just by originating fresh loans. This encourages securitisation of SSI credit, freeing up bank capital for further lending while maintaining priority sector compliance.
What you must do
- Verify that the pooled assets in any securitised investment are direct loans to the SSI sector and qualify as priority sector.
- Ensure the securitised loans were originated by a bank or financial institution, as required.
- Update internal priority sector reporting to include such securitised investments as direct lending.
- Issue instructions to controlling offices and branches to implement this treatment.
Who it affects
All Scheduled Commercial Banks, Regional Rural Banks (RRBs), Local Area Banks, Bank treasury and priority sector lending teams
What conditions must the securitised assets meet to qualify as direct SSI lending?
The pooled assets must represent direct loans to the SSI sector that are already counted under priority sector, and the loans must have been originated by a bank or financial institution.
Does this circular apply to all types of securitised assets?
No, it specifically applies to securitised assets representing direct lending to the SSI sector. Other securitised assets are not covered.
When did this change take effect?
The change was announced on October 26, 2004, as part of the Mid-Term Review of the Annual Policy Statement for 2004-05.