What changed
Incremental loans to medium manufacturing enterprises extended after November 13, 2013, are now included under priority sector advances. For medium and micro/small service enterprises, the credit limit for priority sector classification has been increased from Rs.5 crore to Rs.10 crore for incremental loans after the same date.
What it means for you
Banks can now count more loans to medium manufacturing and service enterprises as priority sector advances, helping them meet priority sector lending targets. The higher credit limit for service enterprises expands the scope of eligible lending, encouraging banks to finance larger MSME units. However, this is a temporary measure valid only until March 31, 2014.
What you must do
- Update internal priority sector lending classification guidelines to include incremental loans to medium manufacturing enterprises from November 13, 2013.
- Raise the credit limit for priority sector classification of service enterprise loans (micro, small, and medium) to Rs.10 crore for incremental loans post-November 13, 2013.
- Track the temporary validity of this dispensation until March 31, 2014, and plan lending accordingly.
- Ensure loan documentation clearly identifies the date of sanction to qualify for the new classification.
Who it affects
All scheduled commercial banks (excluding Regional Rural Banks), Medium manufacturing enterprises, Medium, micro, and small service enterprises
Which loans qualify as priority sector under this circular?
Incremental bank loans to medium manufacturing enterprises (as defined in MSMED Act, 2006) extended after November 13, 2013, qualify. For service enterprises, incremental loans up to Rs.10 crore to medium, micro, and small units also qualify.
Is this change permanent?
No, this dispensation is temporary and will remain in force only up to March 31, 2014.
Does this apply to all banks?
It applies to all scheduled commercial banks except Regional Rural Banks (RRBs).