What changed
This circular consolidates all priority sector lending instructions for primary (urban) co-operative banks issued up to June 30, 2007, replacing the August 2006 master circular. It reaffirms the 60% priority sector target and 15% weaker section sub-target, with specific SSI sub-targets based on investment in plant and machinery.
What it means for you
Urban co-operative banks must maintain 60% of loans and advances to priority sectors, with at least 25% of priority sector advances (or 15% of total advances) to weaker sections. SSI lending must follow tiered sub-targets: 40% to tiny industries (up to ₹5 lakh investment), 20% to units between ₹5-25 lakh, and 40% to other SSI units (₹25-100 lakh). Banks cannot rely solely on loan purpose stated; they must verify actual use through documentary evidence.
What you must do
- Ensure 60% of total loans and advances are directed to priority sectors as per Annex I classification.
- Allocate at least 25% of priority sector advances (or 15% of total advances) to weaker sections.
- Achieve SSI sub-targets: 40% to tiny industries (investment up to ₹5 lakh), 20% to units ₹5-25 lakh, 40% to other SSI units (₹25-100 lakh).
- Verify loan purpose beyond collateral; call for documentary evidence to confirm funds are used for intended priority sector activity.
- Maintain separate registers for priority sector and weaker section advances as per reporting requirements.
Who it affects
All Primary (Urban) Co-operative Banks, Salary Earners' Banks (exempt from priority sector targets), Borrowers in priority sectors including SSI, weaker sections
What are the priority sector lending targets for urban co-operative banks?
Urban co-operative banks must lend 60% of total loans and advances to priority sectors. Within that, at least 25% of priority sector advances (or 15% of total advances) must go to weaker sections.
How are SSI advances sub-targeted under this circular?
SSI advances have three sub-targets based on investment in plant and machinery: 40% to tiny industries (up to ₹5 lakh), 20% to units between ₹5-25 lakh, and 40% to other SSI units (₹25-100 lakh).
Are salary earners' banks required to meet priority sector targets?
No, the priority sector lending stipulation does not apply to Salary Earners' Banks.