Priority Sector Lending: Power Distribution Cos Now Eligible
No longer current — replaced by RBI (Priority Sector Lending – Targets and Classification) Directions, 2024
Source: Reserve Bank of India · RBI/2005-06/304 · issued 20 Feb 2006 · ~1 min read
Quick answerRBI now allows loans to power distribution corporations formed from SEB restructuring to count as indirect agricultural finance, under the same conditions as SEB loans for farmer well energisation.
What changed
Previously, only loans to State Electricity Boards (SEBs) for reimbursing low-tension connection costs to farmers qualified as indirect agriculture finance. Now, loans to power distribution corporations/companies created from SEB bifurcation or restructuring also qualify under the same conditions.
What it means for you
Banks can now extend priority sector lending benefits to loans given to restructured power distribution entities, not just SEBs. This expands the scope of indirect agricultural finance, helping banks meet priority sector targets while supporting power sector reforms.
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
Update internal priority sector lending guidelines to include loans to power distribution corporations from SEB restructuring.
Train branch and credit officers on the new eligibility criteria for indirect agricultural finance.
Ensure loan documentation clearly links disbursements to farmer well energisation costs as per existing conditions.
Monitor state-level power sector reforms to identify eligible distribution entities.
Who it affects
All scheduled commercial banks, Priority sector lending departments, Agricultural finance teams, Power distribution corporations/companies
❓ Common questions
Regulatory timeline
Decoded by BankPulse2026-06-19 19:05 IST
Superseded by — RBI (Priority Sector Lending – Targets and Classification) Directions, 2024
Status change: superseded09 Jul 2026, 04:05 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
What specific loans to power distribution companies qualify as indirect agricultural finance?
Only loans for reimbursing expenditure already incurred by the distribution company for providing low-tension connections from step-down points to individual farmers for energising their wells, same as the condition for SEBs.
Does this circular apply to all power distribution companies or only those from SEB restructuring?
It applies only to power distribution corporations/companies that emerge from the bifurcation or restructuring of State Electricity Boards.
📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
📜 Read the original circular — full text as issued by RBI
RBI/2005-06/304
RPCD. PLFS.BC. NO.63/05.05.03/2005-06
February 20, 2006
The Chairman and Managing Director/
Chief Executive Officer
All Scheduled Commercial Banks
Dear Sir,
Master Circular on Lending to Priority Sector-Modification
Please refer to our Master Circular RPCD.
No. Plan. BC. 21/ 04.09.01/ 2005-06 dated July 18, 2005 issuing guidelines/instructions/directives
to banks on lending to Priority Sector. In terms of paragraph 1.2.2 (i), loans
to State Electricity Boards (SEBs) only for reimbursing the expenditure already
incurred by them for providing low tension connection from step down points
to the individual farmers for energising their wells are classified as indirect
finance to agriculture.
2. As a part of power sector reforms, some of
the States have bifurcated/restructured the Electricity Boards into two corporations,
for generation and distribution of the power. It has, therefore, been decided
that loans to power distribution corporations/companies, emerging out of bifurcation/restructuring
of SEBs, may also be classified as indirect finance to agriculture subject to
the same conditions as stipulated in paragraph 1.2.2 (i) of the Master Circular.
3. You may advise your Controlling Offices/
branches in this regard.
Yours faithfully
(C.S.Murthy)
Chief General Manager-in-charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2005-06/304 · issued 20 Feb 2006. The plain-English explanation above is BankPulse’s own independent summary.
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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=2741&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.
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