What changed
The RBI has issued revised priority sector lending guidelines for UCBs, superseding the previous Master Circular of July 2012. The changes follow recommendations from the M.V. Nair Committee and stakeholder feedback. New categories include Agriculture, Micro and Small Enterprises, Education Loans, Housing Loans, and Others, with targets based on ANBC or credit equivalent of off-balance sheet exposures.
What it means for you
UCBs must now align their lending portfolios to meet the revised priority sector targets, including a 40% overall target and a 10% sub-target for Weaker Sections. The definition of ANBC has been clarified, excluding inter-bank exposures and requiring no deduction of provisions. Banks need to ensure that MSE advances meet specific sub-targets for micro enterprises based on investment limits.
What you must do
- Review and update internal priority sector lending policies to align with the revised categories and targets.
- Calculate ANBC correctly, excluding inter-bank exposures and without netting provisions or accrued interest.
- Ensure MSE advances meet the sub-targets: 40% of total MSE advances to micro enterprises with investment up to ₹10 lakh (manufacturing) or ₹4 lakh (services), and 20% of total MSE advances to micro enterprises with investment between ₹10-25 lakh (manufacturing) or ₹4-10 lakh (services).
- Monitor Weaker Sections advances to achieve the 10% target of ANBC or credit equivalent of off-balance sheet exposures.
- Classify existing priority sector loans under previous guidelines as priority sector until maturity or renewal.
Who it affects
All Primary (Urban) Co-operative Banks, Salary Earners' Banks (exempt from priority sector targets), Borrowers in agriculture, MSE, education, housing, and weaker sections
What is the new definition of Adjusted Net Bank Credit (ANBC) for priority sector targets?
ANBC is total loans and advances minus bills rediscounted with RBI and other approved financial institutions, plus investments made after August 30, 2007 in non-SLR bonds under HTM category. It does not include inter-bank exposures, and no deductions for provisions or accrued interest are allowed.
Are there specific sub-targets for Micro Enterprises within the MSE sector?
Yes, 40% of total MSE advances must go to micro enterprises with investment in plant and machinery up to ₹10 lakh (manufacturing) or equipment up to ₹4 lakh (services). Another 20% must go to micro enterprises with investment between ₹10-25 lakh (manufacturing) or ₹4-10 lakh (services).
Do the revised guidelines apply to loans sanctioned before October 8, 2013?
No, priority sector loans sanctioned under previous guidelines will continue to be classified as priority sector until maturity or renewal. The revised guidelines apply to new sanctions from the date of the circular.