What changed
This Master Circular consolidates all prior RBI circulars on priority sector lending up to June 30, 2007, into one document. It includes categories based on the Internal Working Group's 2005 recommendations, focusing on sectors impacting large populations and employment-intensive areas like agriculture and tiny/small enterprises, and also includes retail trade, micro credit, education loans, and housing loans.
What it means for you
Banks must continue to meet the 40% priority sector lending target and sub-targets for agriculture and weaker sections. The circular provides a single reference point for compliance. Lenders need to align their credit portfolios to ensure these targets are met, with direct and indirect finance to agriculture and small enterprises being key components, along with other categories like retail trade, micro credit, education, and housing.
What you must do
- Review your bank's current priority sector lending portfolio against the 40% target and sub-targets for agriculture and weaker sections.
- Ensure all priority sector advances are classified correctly under the defined categories: agriculture (direct/indirect) and small enterprises (direct/indirect).
- Update internal guidelines and training materials to reflect the consolidated instructions in this Master Circular.
- Maintain accurate reporting to RBI using the prescribed return format for priority sector advances.
Who it affects
All scheduled commercial banks (excluding Regional Rural Banks), Priority sector lending departments, Compliance and risk management teams, Agricultural and small enterprise finance divisions
What is the priority sector lending target for scheduled commercial banks under this circular?
The target remains 40% of aggregate bank advances, as established in 1985, with sub-targets for agriculture and weaker sections.
Which sectors are included in the priority sector as per this Master Circular?
The broad categories are agriculture (direct and indirect finance), small enterprises (direct and indirect finance), retail trade, micro credit, education loans, and housing loans, focusing on sectors that impact large populations and are employment-intensive.
Does this circular change any existing priority sector lending rules?
It consolidates all existing guidelines up to June 30, 2007, as indicated in the Appendix, without specifying new rules in the provided text.