Home › Circulars › RBI/2005-06/27

Priority Sector: Venture Capital Investments No Longer Eligible from July 2005

No longer current — replaced by Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2025
Source: Reserve Bank of India · RBI/2005-06/27 · issued 01 Jul 2005 · ~1 min read
Quick answerFrom July 1, 2005, fresh bank investments in venture capital funds/companies (SEBI-registered) cannot be classified under priority sector lending. Existing investments lose priority sector status from April 1, 2006. Banks must adjust their priority sector portfolios accordingly.
The rule, in the simplest words
How it plays out — a real example

Ravi, the head of priority sector at a large public sector bank, reviews the circular. He immediately instructs his team to stop tagging any new venture capital investments as priority sector. He also flags the existing venture capital portfolio for reclassification by March 2006, and starts planning alternative lending to agriculture and small businesses to fill the gap.

What changed

Previously, scheduled commercial banks could count investments in SEBI-registered venture capital funds/companies as priority sector lending. The RBI has now withdrawn this eligibility for fresh investments made on or after July 1, 2005. Existing investments made up to June 30, 2005 will also lose priority sector classification from April 1, 2006.

What it means for you

Banks can no longer use venture capital investments to meet priority sector lending targets. This may require rebalancing of portfolios toward other eligible categories like agriculture, MSMEs, or education. Lenders with significant venture capital exposure must plan for the April 2006 deadline to avoid shortfalls.

Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.

What banks were required to do at the time

Who it affects

All scheduled commercial banks (including RRBs), Bank treasury and priority sector lending teams, Banks with venture capital fund investments

❓ Common questions

Regulatory timeline

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

Can we still invest in venture capital funds after July 1, 2005?

Yes, you can invest, but those investments will not count toward priority sector lending targets.

What happens to our existing venture capital investments made before July 1, 2005?

They remain eligible for priority sector classification only until March 31, 2006. From April 1, 2006, they lose that status.

📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
Superseded by Reserve Bank of India (Priority Sector Lending – Targets and Classification) Dir
📜 Read the original circular — full text as issued by RBI
Notifications - Reserve Bank of India Skip to main content Selected Selected Change Language हिंदी Search the Website Search Home About Us ▼ About Us Organisation & Functions ▶ Organisation Structure Departments Offices Training Establishment ▶ College of Agricultural Banking Reserve Bank Staff College College of Supervisors RBI's Functions and Working Governors Deputy Governors Executive Directors Communication Policy of RBI Sources of Information ▶ Annual Publications Half-yearly Publications Quarterly Publications Monthly Publications Weekly Publications Occasional Publications SDDS NSDP Data Releases Publications available on Subscription General Information RBI History Museum ▶ The RBI Museum RBI Monetary Museum Notification ▼ Notifications Master Directions Master Circulars Amendment Directions Draft Notifications/Guidelines ▶ Draft Notifications/Guidelines Draft Directions (RE-wise) Index To RBI Circulars Standalone Circulars Circulars Withdrawn Press Releases Speeches & Media Interactions ▼ Speeches Media Interactions Memorial Lectures Podcasts Publications ▼ Biennial Annual Half-Yearly Quarterly Bi-monthly Monthly Weekly Occasional Reports Working Papers Legal Framework ▼ Act Rules Regulations Schemes Research ▼ External Research Schemes RBI Occasional Papers Working Papers RBI Bulletin History DRG Studies KLEMS State Statistics and Finances Statistics ▼ Data Releases Database on Indian Economy Public Debt Statistics Regulatory Reporting ▼ List of Returns Data Definition Validation rules/ Taxonomy List of RBI Reporting Portals FAQs of RBI Reporting Portals Home Notifications Notifications ( 7 kb ) Priority Sector Lending – Investment by banks in venture capital RBI/2005-06/27 RPCD. No. Plan. BC. 5 / 04.09.01/ 2005-06 July 1, 2005 The Chairman/ Managing Director/ Chief Executive Officer All scheduled commercial banks (including RRBs) Dear Sir, Priority Sector Lending – Investment by banks in venture capital Please refer to our Master Circular on Lending to Priority Sector dated July 20, 2004 in terms of which investments made by the scheduled commercial banks in venture capital are reckoned under priority sector lending, provided the venture capital funds/companies are registered with SEBI. 2. On a review of the recent developments, including overall credit growth and growth of investment in venture capital vis-à-vis other sectors, it has been decided that: i. the fresh investments that may be made by banks on or after July 1, 2005 in venture capital shall not be eligible for classification under priority sector lending; and that ii. the investments, which have already been made/to be made by banks up to June 30, 2005, in venture capital shall not be eligible for classification under priority sector lending with effect from April 1, 2006. 3. The banks are, therefore, advised to align their priority sector lendings/investments suitably so as to comply with the above guidelines. 4. Please acknowledge receipt. Yours faithfully, (C S Murthy) Chief General Manager-in-Charge 2026 All Months January February March April May June July August September October November December 2025 All Months January February March April May June July August September October November December 2024 All Months January February March April May June July August September October November December 2023 All Months January February March April May June July August September October November December 2022 All Months January February March April May June July August September October November December 2021 All Months January February March April May June July August September October November December 2020 All Months January February March April May June July August September October November December 2019 All Months January February March April May June July August September October November December 2018 All Months January February March April May June July August September October November December 2017 All Months January February March April May June July August September October November December Archives 2016 All Months January February March April May June July August September October November December 2015 All Months January February March April May June July August September October November December 2014 All Months January February March April May June July August September October November December 2013 All Months January February March April May June July August September October November December 2012 All Months January February March April May June July August September October November December 2011 All Months January February March April May June July August September October November December 2010 All Months January February March April May June July August September October November December 2009 All Months January February March April May June July August September October November December 2008 All Months January February March April May June July August September October November December 2007 All Months January February March April May June July August September October November December 2006 All Months January February March April May June July August September October November December 2005 All Months January February March April May June July August September October November December 2004 All Months January February March April May June July August September October November December 2003 All Months January February March April May June July August September October November December 2002 All Months January February March April May June July August September October November December 2001 All Months January February March April May June July August September October November December 2000 All Months January February March April May June July August September October November December 1999 All Months January February March April May June July August September October November December 1998 All Months January February March April May June July August September October November December 1997 All Months January February March April May June July August September October November December 1996 All Months January February March April May June July August September October November December 1995 All Months January February March April May June July August September October November December 1994 All Months January February March April May June July August September October November December 1993 All Months January February March April May June July August September October November December 1992 All Months January February March April May June July August September October November December 1991 All Months January February March April May June July August September October November December Top Back to previous page More Links Bank Holidays Banking Glossary Citizen's Charter Complaints Contact Us COVID-19 Measures E-LMS Events FAQs Financial Education Forms IFSC/MICR Codes Important Websites Opportunities @ RBI RBI Clarifications RBI Kehta Hai RBI’s Vision and Values (1257 kb)--> Right to Information Act Tenders Follow RBI RSS Twitter YouTube Instagram Facebook LinkedIn © Reserve Bank of India. All Rights Reserved. Sitemap | Disclaimer Website owned and managed by Reserve Bank of India. Contact us on helpdoc[at]rbi[dot]org[dot]in Website last updated date: Jul 27, 2026 Supports: Google Chrome 147+ | Firefox 150+ | Microsoft Edge Version 147+ | Safari 17+ Accessibility Statement | Screen Reader and Accessibility Help
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2005-06/27 · issued 01 Jul 2005. The plain-English explanation above is BankPulse’s own independent summary.
🧰 Tools — save, print, templates & related
Most relevant forCompliance TeamSenior Management / BoardBusiness Head / Vertical HeadRisk ManagementInternal AuditData Science / Analytics
🛠 Banker’s toolkit — checklists & reply templates →
Related circulars · Financial Inclusion & Priority Sector
Small Account Rules for Co-operative Banks – RBI Circular 2011RRB CRR Hiked to 9% from Aug 30, 2008CRR Hiked for RRBs by 50 bps in Two StagesRRBs: PMLA Compliance – CTR, STR, and KYC Software MandateRRB CRR Hiked to 8.25% from May 24, 2008
Browse all departments →

💬 Banker Discussion

Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.

Loading comments…
BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=2323&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
Public beta — plain-English informational summaries. Always verify against the official RBI source (circular number cited on every page) before making compliance, credit, treasury, audit, or operational decisions. · Join our WhatsApp channel ↗
—