What changed
RBI added 12 service activities (e.g., consultancy, legal services, educational institutions) to priority sector for RRBs, provided they meet MSMED investment caps. Retail trade is no longer a separate category; it is now part of small service enterprises.
What it means for you
RRBs can now classify loans for these service activities as priority sector, helping meet lending targets. Retail trade loans up to Rs 20 lakh are now under small service enterprises, simplifying classification. Banks must ensure borrowers meet investment limits (equipment up to Rs 10 lakh for micro, Rs 2 crore for small).
What you must do
- Update internal priority sector classification guidelines to include the 12 listed service activities.
- Ensure loan documentation verifies investment in equipment as per MSMED Act limits.
- Reclassify existing retail trade loans under small service enterprises, not as a separate category.
- Train staff on new eligibility criteria for service enterprise loans.
- Acknowledge receipt of this circular to your regional RBI office.
Who it affects
Regional Rural Banks (RRBs), Priority sector lending officers, Small service enterprise borrowers, Retail trade borrowers
What are the new service activities added to priority sector for RRBs?
12 activities including consultancy, legal services, educational institutions, training centres, retail trade, and more, as listed in the circular.
How does this affect retail trade loans?
Retail trade is no longer a separate priority sector category; loans for retail trade are now classified under small service enterprises, subject to MSMED investment limits.
What are the investment limits for micro and small service enterprises?
Micro service enterprises: equipment investment up to Rs 10 lakh; small service enterprises: up to Rs 2 crore (original cost excluding land, building, and unrelated items).