What changed
RBI revised priority sector lending guidelines for Regional Rural Banks (RRBs) following an internal working group's review. 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. The revised definition of small and micro enterprises under the MSMED Act, 2006, is incorporated.
What it means for you
RRBs must align their lending portfolios with the revised priority sector definitions and targets immediately. This may require adjustments in credit allocation to ensure compliance, particularly for agriculture and small enterprises. Non-compliance should be reported to the respective RBI Regional Office with a compliance timeline.
What you must do
- Review and implement the revised priority sector lending guidelines immediately.
- Update internal policies to reflect the new definition of small and micro enterprises per MSMED Act, 2006.
- Report any compliance difficulties to the concerned RBI Regional Office with reasons and a timeline.
- Prepare to submit revised half-yearly and yearly returns on priority sector advances as per new formats.
Who it affects
All Regional Rural Banks (RRBs)
What prompted the revision of priority sector lending guidelines?
The revision followed an internal working group's review, which found that the enlargement of priority sector areas had led to a loss of focus. The group recommended focusing on sectors that impact large sections of the population, weaker sections, and employment-intensive sectors like agriculture and tiny/small enterprises.
When do the revised guidelines take effect?
The revised guidelines are operational with immediate effect from the date of the circular, August 22, 2007.
What should an RRB do if it faces difficulty complying with the new guidelines?
The RRB should approach the concerned Regional Office of the Reserve Bank (Rural Planning and Credit Department) with appropriate reasons and a time frame for compliance.