What changed
Direct agriculture loans now include loans to corporates, farmers' producer companies, partnership firms, and cooperatives for crop, medium/long-term, pre/post-harvest, and export credit up to ₹2 crore per borrower. Loans above ₹2 crore are classified as indirect agriculture. MSE service sector loans qualify as direct finance up to ₹2 crore per unit. Housing loans to government agencies and for EWS/LIG projects now have a ₹10 lakh per dwelling unit ceiling, with family income limit of ₹1.2 lakh per annum.
What it means for you
Banks can now classify more agriculture loans as direct priority sector, helping meet targets. The ₹2 crore cap for MSE service sector loans expands priority sector lending opportunities. Housing loan relaxations allow banks to support affordable housing projects more easily, potentially increasing priority sector compliance.
What you must do
- Update internal priority sector classification systems to include new direct agriculture categories up to ₹2 crore.
- Train loan officers on revised MSE service sector eligibility up to ₹2 crore per unit.
- Adjust housing loan policies to accommodate ₹10 lakh per dwelling unit ceiling and ₹1.2 lakh family income limit for EWS/LIG.
- Review existing agriculture loans above ₹2 crore and reclassify as indirect agriculture.
- Ensure compliance with effective date of July 20, 2012 for all changes.
Who it affects
All scheduled commercial banks (excluding RRBs), Agriculture lending departments, MSE lending teams, Housing finance divisions, Priority sector compliance officers
What is the new limit for direct agriculture loans to corporates and cooperatives?
The aggregate limit is ₹2 crore per borrower for purposes like crop loans, medium/long-term loans, pre/post-harvest activities, and export credit. Loans above this limit are treated as indirect agriculture.
How does the housing loan change affect priority sector classification?
Loans to government agencies for dwelling units or slum rehabilitation up to ₹10 lakh per unit qualify. Also, loans for housing projects exclusively for EWS/LIG with total cost up to ₹10 lakh per unit and family income up to ₹1.2 lakh per annum are eligible.
Are MSE service sector loans now eligible for direct finance?
Yes, bank loans to MSEs engaged in services qualify as direct finance up to ₹2 crore per borrower/unit, provided they meet the MSMED Act equipment investment criteria.