Current · Source: Reserve Bank of India · RBI/2007-2008/326 · issued 22 May 2008 · ~1 min read
Quick answerRBI now permits Regional Rural Banks to sell priority sector loan assets that exceed their 60% lending target, enabling better credit flow and balance sheet management.
The rule, in the simplest words
Regional Rural Banks (RRBs) can sell priority sectorloan assets that exceed their 60% lending target.
RRBs can sell excess priority sector loans to scheduled commercial banks.
The buying bank must hold the loan for at least six months to classify it as a priority sector loan.
How it plays out — a real example
An agri & priority-sector lending officer in Indore at a Regional Rural Bank identifies that their bank has exceeded the 60% priority sector lending target. They decide to sell some of these excess loans to a nearby scheduled commercial bank, which will then hold the loans for at least six months to meet their own priority sector obligations. This allows the Regional Rural Bank to free up capital and reduce concentration risk, while also enabling better credit flow to the priority sector.
What changed
RBI has decided to allow RRBs to sell loan assets held under priority sector categories in excess of the prescribed 60% priority sector lending target, as per paragraph 137 of the Annual Policy Statement 2008-09.
What it means for you
This gives RRBs a tool to manage priority sector compliance more flexibly. By selling excess priority sector loans, they can free up capital and reduce concentration risk, while buyers can meet their own priority sector obligations.
What you must do
Identify priority sector loan assets exceeding the 60% target for potential sale.
Ensure that sold loans are held by the purchasing bank for at least six months to be classified under priority sector.
Update internal policies to facilitate sale of excess priority sector loans.
Acknowledge receipt of this circular to the respective Regional Office of RBI.
Only those loan assets that are in excess of the prescribed 60% priority sector lending target can be sold.
What is the minimum holding period for sold loans?
The purchasing bank must hold the bought loan assets for at least six months to classify them under priority sector.
Does this change affect priority sector targets for RRBs?
No, the 60% priority sector lending target remains unchanged; only the ability to sell excess loans is introduced.
📜 Read the original circular — full text as issued by RBI
RBI/2007-2008/326
RPCD.
CO. RRB. No. BC. 71 /03.05.33/2007-08
May 22, 2008
The
Chairman
All Regional Rural Banks
Dear Sir
Increasing
opportunities for flow of credit to priority sector
Please
refer to paragraph 137 of the Annual Policy Statement for the
year 2008-09 (copy enclosed). As indicated in the annual Policy Statement, it
has been decided to allow RRBs to sell loan assets held by them under priority
sector categories in excess of the prescribed priority sector lending target of
60 per cent.
2. Please acknowledge receipt to our respective
Regional Office.
Yours faithfully
(G.Srinivasan)
Chief
General Manager-in-Charge
137 . In
terms of the revised guidelines on lending to the priority sector, scheduled commercial
bank can undertake outright purchase of any loan asset eligible to be categorised
under the priority sector from other banks and financial institutions and classify
the same under the respective categories of priority sector lending (direct or
indirect), provided the loans purchased are held at least for a period of six
months. To enable greater flow of credit to the priority sectors, it is proposed:
to allow RRBs to sell loan assets held by them under priority sector categories
in excess of the prescribed priority sector lending target of 60 per cent.
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2007-2008/326 · issued 22 May 2008. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (Regional Rural Banks (RRBs), Scheduled commercial banks (as buyers), Priority sector lending compliance teams), your first concrete step on “RRBs Allowed to Sell Excess Priority Sector Loans” is: “Identify priority sector loan assets exceeding the 60% target for potential sale.” (RBI issued this 22 May 2008).
Action required: Identify priority sector loan assets exceeding the 60% target for potential sale.
Action required: Ensure that sold loans are held by the purchasing bank for at least six months to be classified under priority sector.
Action required: Update internal policies to facilitate sale of excess priority sector loans.
Action required: Acknowledge receipt of this circular to the respective Regional Office of RBI.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
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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=4187&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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