What changed
The limit for loans to farmers against pledge/hypothecation of agricultural produce (including warehouse receipts) for up to 12 months was increased from ₹25 lakh to ₹50 lakh, applicable to both direct and indirect agriculture. The limit for loans to dealers/sellers of agricultural inputs was raised from ₹1 crore to ₹5 crore per borrower. For Micro and Small Service Enterprises (MSEs) meeting MSMED Act equipment criteria, the loan limit was increased from ₹2 crore to ₹5 crore per borrower/unit.
What it means for you
Banks can now extend larger loans under priority sector agriculture and MSE categories, helping meet targets more easily while supporting higher-value credit needs. The revised limits reduce the risk of loans exceeding caps and being classified as non-priority, improving portfolio quality. Lenders should update their credit policy manuals and priority sector monitoring systems to reflect the new thresholds from April 1, 2013.
What you must do
- Update internal priority sector lending policy documents and loan origination systems with the new limits effective April 1, 2013.
- Train credit officers and branch staff on the revised caps for agricultural produce pledge loans, input dealer loans, and service MSE loans.
- Review existing loan portfolios to reclassify any loans that now fall within priority sector limits and adjust reporting to RBI accordingly.
- Ensure MSE loans up to ₹5 crore are correctly classified as priority sector only if the borrower meets MSMED Act equipment investment criteria.
Who it affects
All scheduled commercial banks (excluding Regional Rural Banks), Priority sector lending departments, Agricultural loan officers, MSE lending teams, Compliance and reporting teams
From which date are the revised priority sector limits applicable?
The revised limits are effective from April 1, 2013, as stated in the circular.
Does the ₹50 lakh limit for agricultural produce pledge loans apply to both direct and indirect agriculture?
Yes, the circular specifies that the increased limit applies to both direct and indirect agriculture.
What is the condition for MSE service enterprises to avail the increased ₹5 crore limit?
The borrower/unit must satisfy the investment criteria for equipment as defined under the MSMED Act, 2006.