What changed
RBI revised priority sector lending guidelines based on an Internal Working Group's recommendations, effective immediately from April 30, 2007. The revision incorporates the Micro, Small and Medium Enterprises Development Act, 2006 definition for small and micro enterprises. The changes aim to refocus priority sector lending on sectors impacting large populations, weaker sections, and employment-intensive areas like agriculture and tiny/small enterprises.
What it means for you
Banks must immediately align their priority sector lending portfolios with the revised definitions and focus areas. The inclusion of the MSMED Act 2006 definition may require updating loan classification and reporting systems. Banks should review their current lending to ensure compliance with the refocused eligibility criteria, particularly for agriculture and tiny/small enterprises.
What you must do
- Review and update internal priority sector lending policies to align with the revised guidelines effective immediately.
- Reclassify small and micro enterprise loans as per the MSMED Act 2006 definition.
- Ensure lending focus shifts to employment-intensive sectors like agriculture and tiny/small enterprises as per the revised focus.
- Prepare to submit revised half-yearly and yearly returns in the new formats being separately forwarded.
- Contact RBI with reasons and a time frame if any compliance difficulty arises.
Who it affects
All scheduled commercial banks (excluding Regional Rural Banks), Priority sector lending departments, Credit and risk management teams, Compliance and reporting teams
What is the effective date of these revised guidelines?
The revised guidelines are effective with immediate effect from April 30, 2007, as stated in the circular.
Which sectors are now emphasized under the revised priority sector?
The revised guidelines emphasize sectors that impact large sections of the population, weaker sections, and employment-intensive sectors such as agriculture and tiny and small enterprises.
What should a bank do if it faces difficulty complying with the revised guidelines?
The bank may approach the Reserve Bank of India with appropriate reasons and a time frame for compliance, as mentioned in the circular.