What changed
RBI issued a clarification on April 30, 2010, confirming that working capital limits granted to units engaged in agricultural and allied activities, including food and agro-based processing units, are eligible for priority sector classification regardless of whether the borrower is involved in exports. Banks are now required to report such export credit separately under the heading 'Export credit to agriculture sector'.
What it means for you
This clarification removes any ambiguity for banks: export credit for agriculture and allied activities counts toward priority sector lending targets. Banks can now confidently classify these loans as priority sector without worrying about the export status of the borrower. It also mandates separate reporting, which will help RBI monitor the flow of export credit to agriculture.
What you must do
- Review existing export credit portfolios for agriculture and allied activities to ensure correct priority sector classification.
- Set up separate reporting for 'Export credit to agriculture sector' in your priority sector returns.
- Train lending teams on this clarification to avoid misclassification of working capital limits for agro-processing units.
- Update internal priority sector lending policies to explicitly include export credit for agriculture and allied activities.
Who it affects
All domestic scheduled commercial banks (excluding Regional Rural Banks), Branches handling agricultural and agro-processing loans, Priority sector lending compliance teams, Export credit departments
Does this clarification apply to all types of agricultural loans?
Yes, loans for agriculture and allied activities, including working capital for food and agro-based processing units, are eligible for priority sector classification irrespective of export involvement.
How should we report these loans in our returns?
Export credit for agriculture and allied activities must be reported separately under the heading 'Export credit to agriculture sector' in your priority sector returns.
Does this apply to Regional Rural Banks?
No, this circular is addressed only to all domestic scheduled commercial banks, excluding Regional Rural Banks.