What changed
RBI has added 12 new service activities—including consultancy, legal services, educational institutions, and advertising agencies—under Micro and Small (Service) Enterprises for priority sector lending. The separate 'Retail Trade' category has been removed; retail trade loans now fall under Small (Service) Enterprises. Eligibility requires investment in equipment not exceeding Rs 10 lakh for micro and Rs 2 crore for small service enterprises.
What it means for you
Banks can now classify loans to these newly listed service activities as priority sector advances, helping meet lending targets. The merger of Retail Trade into Small (Service) Enterprises simplifies reporting but requires banks to update internal classification and reporting systems. Lenders must ensure borrowers meet the MSMED Act investment thresholds to qualify.
What you must do
- Update internal loan classification systems to include the 12 new service activities under Micro and Small (Service) Enterprises.
- Remove separate 'Retail Trade' category and reclassify existing retail trade loans under Small (Service) Enterprises.
- Verify borrower investment in equipment (original cost) does not exceed Rs 10 lakh (micro) or Rs 2 crore (small) for eligibility.
- Report these loans under 'Total credit to Small Enterprises' in half-yearly and yearly priority sector returns.
- Issue instructions to all branches and controlling offices for consistent implementation.
Who it affects
All scheduled commercial banks (excluding RRBs), Priority sector lending departments, Branch managers handling MSME loans, Compliance and reporting teams
Which new service activities are now eligible under priority sector?
12 activities: Consultancy Services, Composite Broker Services in Risk and Insurance Management, Third Party Administration for Medical Insurance Claims, Seed Grading Services, Training-cum-Incubator Centres, Educational Institutions, Training Institutes, Retail Trade, Legal Services, Trading in Medical Instruments (new), Placement and Management Consultancy, and Advertising Agencies.
What is the investment limit for service enterprises to qualify?
For micro service enterprises: equipment investment up to Rs 10 lakh. For small service enterprises: up to Rs 2 crore. Original cost excludes land, building, furniture, and fittings not directly related to service.
How should banks report retail trade loans now?
Retail trade loans are no longer a separate category. They must be reported under 'Total credit to Small Enterprises' in the priority sector returns, as part of Small (Service) Enterprises.