Home › Circulars › RBI/2009-10/409

RRBs: Export MSE Loans Eligible for Priority Sector

Current · Source: Reserve Bank of India · RBI/2009-10/409 · issued 21 Apr 2010 · ~1 min read
Quick answerRBI clarifies that loans to micro and small enterprises (MSEs) engaged in exports qualify as priority sector advances for RRBs, provided the borrower meets MSMED Act, 2006 definitions. Export credit to MSEs must be reported separately.
The rule, in the simplest words
How it plays out — a real example

An agri & priority-sector lending officer in Indore, working at a Regional Rural Bank, is happy to learn that loans to small exporters can now be classified as priority sector advances. She reviews the existing MSE loan portfolio and identifies eligible borrowers, ensuring that their loans are correctly classified. She also updates the internal systems to capture and report export credit to MSEs separately, which will help the bank meet its priority sector lending targets and provide better data for RBI monitoring.

What changed

RBI issued a clarification confirming that loans by RRBs to MSEs (manufacturing and services) are eligible for priority sector classification regardless of whether the enterprise is engaged in exports. This clarifies earlier ambiguity on the matter. Banks must now report export credit to MSEs under a separate heading.

What it means for you

RRBs can now confidently classify export-oriented MSE loans as priority sector advances, helping them meet priority sector lending targets. This removes a key ambiguity and encourages lending to small exporters. Separate reporting of export credit to MSEs will improve data granularity for RBI monitoring.

What you must do

Who it affects

Regional Rural Banks (RRBs), Micro and small enterprises (MSEs) engaged in exports, Priority sector lending monitoring teams at RRBs

❓ Common questions

Regulatory timeline

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

Does this circular apply to all RRBs?

Yes, it is addressed to all Regional Rural Banks and clarifies priority sector classification for loans to MSEs engaged in exports.

What definition of MSE should we use for classification?

The definition under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 applies, covering both manufacturing and service enterprises.

How should we report export credit to MSEs?

Such credit must be reported separately under the heading 'Export credit to micro and small enterprises sector' as per paragraph 3 of the circular.

📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
Partially modified by CRR cut for SCBs and RRBs by 50 bps to 5.50%
RBI’s words: “and RPCD.CO.RRB.No.72/03.05. 28(B)/2009-10 dated April 21, 2010”
📜 Read the original circular — full text as issued by RBI
RBI/2009-10/409 RPCD.CO RRB.No. 76 /03.05.33/2009-10 April 21, 2010 The Chairman All Regional Rural Banks (RRBs) Dear Sir, Priority Sector Lending - Advances to Micro and Small Enterprises engaged in exports Please refer to our circular RPCD.CO.RRB.BC.No. 20/03.05.33/2007-08 dated August 22,2007 on lending to priority sector, in terms of which finance granted by banks to micro and small enterprises as defined under the Micro, Small and Medium Enterprises Development (MSMED) Act,2006,is eligible for classification under priority sector. 2. Some banks have sought clarification in respect of classification of loans granted to micro and small enterprises engaged in exports, under priority sector. The issue has been examined and it is clarified that loans granted by RRBs to micro and small enterprises (MSE) (manufacturing and services) are eligible for classification under priority sector, provided such enterprises satisfy the definition of MSE sector as contained in MSMED Act, 2006, irrespective of whether the borrowing entity is engaged in export or otherwise. 3. The export credit granted to MSEs may be reported separately under heading "Export credit to micro and small enterprises sector". 4. Please acknowledge receipt of the circular. Yours faithfully (R.C.Sarangi) Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2009-10/409 · issued 21 Apr 2010. The plain-English explanation above is BankPulse’s own independent summary.
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Who does what — compliance checklist
🏦 Branch Manager
  • Communicate the clarification to branch managers to avoid misclassification of export MSE loans.
💻 IT / Systems
  • Update internal systems to capture and report export credit to MSEs under the separate heading as specified.
📜 Compliance
  • Review existing MSE loan portfolio to identify export-oriented borrowers and ensure eligible loans are classified as priority sector.
  • Train credit and reporting teams on the clarified eligibility criteria to ensure consistent classification.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (Regional Rural Banks (RRBs), Micro and small enterprises (MSEs) engaged in exports, Priority sector lending monitoring teams at RRBs), your first concrete step on “RRBs: Export MSE Loans Eligible for Priority Sector” is: “Review existing MSE loan portfolio to identify export-oriented borrowers and ensure eligible loans are classified as priority sector.” (RBI issued this 21 Apr 2010).

  1. Circular: RBI/2009-10/409 -- RRBs: Export MSE Loans Eligible for Priority Sector
  2. Issued: 21 Apr 2010
  3. Action required: Review existing MSE loan portfolio to identify export-oriented borrowers and ensure eligible loans are classified as priority sector.
  4. Action required: Update internal systems to capture and report export credit to MSEs under the separate heading as specified.
  5. Action required: Train credit and reporting teams on the clarified eligibility criteria to ensure consistent classification.
  6. Action required: Communicate the clarification to branch managers to avoid misclassification of export MSE loans.
  7. Owner: ____________ Target date: ____________
  8. Board/committee approval needed? Y / N
  9. 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.

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Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=5607&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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