What changed
RBI, via circular dated May 18, 2007, added a new clause (j) under Section I, paragraph 8 of the April 30, 2007 circular on priority sector lending. It allows loans to persons from minority communities notified by the Government of India to count as weaker sections. In states where one notified minority is in majority (Jammu and Kashmir, Punjab, Sikkim, Mizoram, Nagaland, Lakshadweep), only other notified minorities are covered.
What it means for you
Banks can now classify loans to notified minority community members as priority sector advances under weaker sections, helping meet targets. This broadens the eligible borrower base, especially in states with diverse minority populations. Lenders must update their internal priority sector classification systems and ensure correct state-wise application of the majority-minority exception.
What you must do
- Update internal priority sector lending guidelines to include loans to notified minority communities as weaker sections.
- Train credit officers on the state-wise exception: in J&K, Punjab, Sikkim, Mizoram, Nagaland, and Lakshadweep, only non-majority notified minorities qualify.
- Review existing loan portfolios to reclassify eligible loans under the new clause for priority sector reporting.
- Ensure acknowledgment of this circular to RBI as required.
Who it affects
All scheduled commercial banks (excluding RRBs), Priority sector lending departments, Credit officers handling weaker section loans, Compliance and reporting teams
Which states have the exception where a notified minority in majority is excluded?
The exception applies to Jammu and Kashmir, Punjab, Sikkim, Mizoram, Nagaland, and Lakshadweep. In these states, if a notified minority community is actually in majority, only other notified minorities are covered under the new clause.
Does this change affect other priority sector lending stipulations?
No, all other stipulations under the revised guidelines remain unchanged. Only the addition of clause (j) under paragraph 8 of Section I is made.