What changed
This master circular updates and consolidates all priority sector lending instructions for UCBs issued up to June 30, 2009, replacing the previous year's circular. It formalizes the inclusion of agriculture, small enterprises, retail trade, micro credit, education loans, and housing loans as priority sectors, based on the 2005 Internal Working Group recommendations.
What it means for you
UCBs must ensure their lending aligns with the defined priority sector categories—agriculture and small enterprises—to meet regulatory targets. The circular reinforces the need for accurate classification and reporting, impacting loan portfolio composition and compliance monitoring.
What you must do
- Review and update internal policies to align with the consolidated priority sector categories and definitions.
- Ensure all agriculture and small enterprise loans are correctly classified as direct or indirect finance per guidelines.
- Submit the annual return on priority sector lending (Statement II) and credit flow to minorities (Statement III) as prescribed.
- Present the memorandum on priority sector lending to the board of directors (Statement I) for review.
- Monitor sub-targets for weaker sections and minority concentration districts as per state-wise list.
Who it affects
All Primary (Urban) Co-operative Banks (UCBs), Chief Executive Officers of UCBs, Board of Directors of UCBs, Priority sector lending officers and compliance teams
What are the main categories under priority sector for UCBs?
The categories are agriculture (direct and indirect finance), small enterprises (direct and indirect finance), retail trade, micro credit, education loans, and housing loans. Direct agriculture loans go to individual farmers for farming or allied activities, while indirect finance covers loans to entities supporting agriculture.
Are there specific targets for priority sector lending in this circular?
The circular references earlier targets: commercial banks were advised to raise priority sector advances to 33 1/3% of aggregate advances by March 1979. For UCBs, specific targets were set based on the Standing Advisory Committee's recommendations from 1983.
What reporting is required under this master circular?
UCBs must submit an annual return on lending to priority sector and weaker sections (Statement II), a proforma on credit flow to minorities (Statement III), and a memorandum to the board of directors (Statement I).