Master Directions – Priority Sector Lending (PSL) – Targets and Classification (<span style="color: red">Updated as on June 21, 2024</span>) - ربی - Reserve Bank of India
RbiSearchHeader
Type of Document:
Function:
Department:
Search by Keyword:
Year:
Month:
From Date:
To Date:
Format:
Trending Searches
Past Searches
Useful Links
Notification Marquee
ناشر الأصول
Master Directions – Priority Sector Lending (PSL) – Targets and Classification (Updated as on June 21, 2024)
updated-as-on:
- 2024-06-21
- 2023-07-27
- 2022-10-20
- 2022-08-02
- 2021-10-26
- 2021-06-11
- 2021-05-31
- 2021-04-29
- 2020-09-04
RBI/FIDD/2020-21/72 September 04, 2020 The Chairman / Managing Director/ Madam/Dear Sir, Master Directions – Priority Sector Lending (PSL) – Targets and Classification. The Reserve Bank of India has, from time to time, issued a number of instructions / guidelines to banks relating to Priority Sector Lending. The Master Directions enclosed incorporate the updated instructions / guidelines on the subject. The list of circulars consolidated in this Master Directions is indicated in the Appendix. Yours faithfully, (Nisha Nambiar) INDEX Master Directions- Reserve Bank of India (Priority Sector Lending – In exercise of the powers conferred by Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949, the Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified. CHAPTER – I 1. Short Title and Commencement 1.1 These Directions shall be called the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2020. 1.2 These Directions shall come into effect on the day they are placed on the official website of the Reserve Bank of India. The provisions of these Directions shall apply to every Commercial Bank [including Regional Rural Bank (RRB), Small Finance Bank (SFB), Local Area Bank] and Primary (Urban) Co-operative Bank (UCB) other than Salary Earners’ Bank. 3. Definitions/ Clarifications 3.1 In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below:
3.2 All other expressions, unless defined herein, shall have the same meaning as has been assigned to them under the Banking Regulation Act, 1949 or the Reserve Bank of India Act, 1934 or any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be. 3.3 Banks must ensure that loans extended under priority sector are for approved purposes and the end use is continuously monitored. The banks should put in place proper internal controls and systems in this regard. CHAPTER – II 4. The categories under priority sector are as follows: The details of eligible activities under the above categories are specified in Chapter III. 5. Targets /Sub-targets for Priority sector 5.1 The targets and sub-targets set under priority sector lending, to be computed on the basis of the ANBC/ CEOBE as applicable as on the corresponding date of the preceding year, are as under:
5.2 The targets for lending to SMFs and for Weaker Sections shall be revised upwards from FY 2021-22 onwards as follows:
5.3 UCBs shall comply with the stipulated targets as under:
5.4 All domestic banks (other than UCBs) and foreign banks with more than 20 branches are directed to ensure that the overall lending to Non-Corporate Farmers (NCFs) does not fall below the system-wide average of the last three years’ achievement which will be separately notified every year. The applicable target for lending to the non-corporate farmers for FY 2022-23 will be 13.78% of ANBC or CEOBE whichever is higher. All efforts should be made by banks to increase the Farm Credit (as per para 8.1) higher than the NCF target. 6. Computation of Adjusted Net Bank Credit (ANBC) 6.1 For the purpose of priority sector lending, ANBC denotes the outstanding Bank Credit in India [As prescribed in item No.VI of Form ‘A’ under Section 42 (2) of the RBI Act, 1934] and computed as follows:
6.2 For the purpose of calculation of CEOBE, banks shall be guided by the Master Circular on Exposure Norms issued by Department of Regulation, RBI vide DBR.No.Dir.BC.12/13.03.00/ 2015-16 dated July 1, 2015 and as updated from time to time. UCBs shall be guided by the relevant provisions of the Master Circular dated July 1, 2015 on ‘Prudential Norms on Capital Adequacy - UCBs’ issued by Reserve Bank of India. 6.3 SFBs shall be further guided by Para 6.5 (ii to vii) of the Operating Guidelines for Small Finance Banks issued by Department of Regulation (RBI/2016-17/81 DBR.NBD. No.26/16.13.218/2016-17 dated October 06, 2016), pertaining to treatment of grandfathered loans, for computation of ANBC. 6.4 While calculating Net Bank Credit as above, if banks subtract prudential write off at Corporate/Head Office level, it must be ensured that the credit to priority sector and all other sub-sectors so written off should also be subtracted category wise from priority sector and sub-target achievement. Wherever, investments or any other items which are treated as eligible for classification under priority sector target/sub-target achievement, the same should also form part of Adjusted Net Bank Credit. 6.5 All the banks have to adhere to the respective licencing guidelines and operating guidelines issued by the Department of Regulation, RBI and updated from time to time 7. Adjustments for weights in PSL Achievement To address regional disparities in the flow of priority sector credit at the district level, it was decided to rank districts on the basis of per capita credit flow to priority sector and build an incentive framework for districts with comparatively lower flow of credit and a dis-incentive framework for districts with comparatively higher flow of priority sector credit. With effect from FY 2024-25, a higher weight (125%) shall be assigned to the incremental priority sector credit in the identified districts where the credit flow is comparatively lower (per capita PSL less than ₹9,000), and a lower weight (90%) will be assigned for incremental priority sector credit in the identified districts where the credit flow is comparatively higher (per capita PSL greater than ₹42,000). The list of both categories of districts is given in Annexes IA and IB and will be valid up to FY 2026-27. The districts other than those mentioned in Annexes IA and IB will continue to have existing weightage of 100%. The banks should continue to report the actual outstanding amount in QPSA returns as hitherto. Adjustments for weights to incremental PSL credit will be done by RBI, based on reporting of district wise credit flow to FIDD, CO through the ADEPT database. RRBs, UCBs, LABs and foreign banks (including WoS) would be exempted from adjustments of weights in PSL achievement due to their currently limited area of operation/catering to a niche segment. CHAPTER – III The lending to agriculture sector will include Farm Credit (Agriculture and Allied Activities), lending for Agriculture Infrastructure and Ancillary Activities. 8.1 Farm Credit - Individual farmers Loans to individual farmers [including Self Help Groups (SHGs) or Joint Liability Groups (JLGs) i.e. groups of individual farmers, provided banks maintain disaggregated data of such loans] and Proprietorship firms of farmers, directly engaged in Agriculture and Allied Activities, viz. dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture. This will include:
8.2 Farm Credit - Corporate farmers, Farmer Producer Organisations (FPOs)/(FPC) Companies of Individual Farmers, Partnership firms and Co-operatives of farmers engaged in Agriculture and Allied Activities (a) Loans for the following activities will be subject to an aggregate limit of ₹2 crore per borrowing entity:
(b) Loans up to ₹75 lakh against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months against NWRs/eNWRs and up to ₹50 lakh against warehouse receipts other than NWRs/eNWRs. (c) Loans up to ₹5 crore per borrowing entity to FPOs/FPCs undertaking farming with assured marketing of their produce at a pre-determined price. (d) UCBs are not permitted to lend to co-operatives of farmers. 8.3 Agriculture Infrastructure Loans for agriculture infrastructure will be subject to an aggregate sanctioned limit of ₹100 crore per borrower from the banking system. List of activities is furnished in Annex II. 8.4 Ancillary Services 8.4.1 Following loans under ancillary services will be subject to limits prescribed as under:
8.4.2 Outstanding deposits under RIDF and other eligible funds with NABARD on account of priority sector shortfall. 8.4.3 The eligible activities under ancillary services and food processing is given in Annex II and Annex III, respectively. 8.5 Small and Marginal Farmers (SMFs) For the purpose of computation of achievement of the sub-target, Small and Marginal Farmers will include the following:
8.6 Lending by banks to NBFCs and MFIs for on-lending in agriculture
9. Micro, Small and Medium Enterprises (MSMEs) The definition of MSMEs shall be as given in the Master Direction – Lending to Micro, Small & Medium Enterprises (MSME) Sector FIDD.MSME & NFS.12/06.02.31/2017-18 dated July 24, 2017 as updated from time to time. All bank loans to MSMEs shall qualify for classification under priority sector lending. 9.1 Factoring Transactions (not applicable to RRBs and UCBs)
9.2 Khadi and Village Industries Sector (KVI) All loans to units in the KVI sector will be eligible for classification under the sub-target of 7.5 percent prescribed for Micro Enterprises under priority sector. 9.3 Other Finance to MSMEs
10. Export Credit (not applicable to RRBs and LABs) Export credit under agriculture and MSME sectors are allowed to be classified as PSL in the respective categories viz. agriculture and MSME. Export Credit (other than in agriculture and MSME) will be allowed to be classified as priority sector as per the following table:
10.1 Export credit includes pre-shipment and post-shipment export credit (excluding off-balance sheet items) as defined in Master Circular on Rupee / Foreign Currency Export Credit and Customer Service to Exporters issued by Department of Regulation, RBI vide DBR No.DIR.BC.14/04.02.002/2015-16 dated July 1, 2015 and updated from time to time. Loans to individuals for educational purposes, including vocational courses, not exceeding ₹ 20 lakh will be considered as eligible for priority sector classification. Loans currently classified as priority sector will continue till maturity. 12.1 Bank loans to Housing sector as per limits prescribed below are eligible for priority sector classification:
12.2 Loans up to ₹10 lakh in metropolitan centres and up to ₹6 lakh in other centres for repairs to damaged dwelling units conforming to the overall cost of the dwelling unit as prescribed in para 12.1. 12.3 Bank loans to any governmental agency for construction of dwelling units or for slum clearance and rehabilitation of slum dwellers subject to dwelling units with carpet area of not more than 60 sq.m. 12.4 Bank loans for affordable housing projects using at least 50% of FAR/FSI for dwelling units with carpet area of not more than 60 sq.m. 12.5 Bank loans to HFCs (approved by NHB for their refinance) for on-lending, up to ₹20 lakh for individual borrowers, for purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to conditions specified in para 23 and 24. 12.6 Outstanding deposits with NHB on account of priority sector shortfall. Bank loans to social infrastructure sector as per limits prescribed below are eligible for priority sector classification 13.1. Bank loans up to a limit of ₹5 crore per borrower for setting up schools, drinking water facilities and sanitation facilities including construction/ refurbishment of household toilets and water improvements at household level, etc. and loans up to a limit of ₹10 crore per borrower for building health care facilities including under ‘Ayushman Bharat’ in Tier II to Tier VI centres. In case of UCBs, the above limits are applicable only in centres having a population of less than one lakh. 13.2. # Bank loans to MFIs extended for on-lending to individuals and also to members of SHGs/JLGs for water and sanitation facilities subject to the criteria laid down in paragraph 21 of these Master Directions. # not applicable to RRBs, UCBs and SFBs. Bank loans up to a limit of ₹30 crore to borrowers for purposes like solar based power generators, biomass-based power generators, wind mills, micro-hydel plants and for non-conventional energy based public utilities, viz., street lighting systems and remote village electrification etc., will be eligible for Priority Sector classification. For individual households, the loan limit will be ₹10 lakh per borrower. The following loans as per the prescribed limits are eligible for priority sector classification: 15.1. Loans provided directly by banks to individuals and individual members of SHG/JLG satisfying the criteria as prescribed in Master Direction on Regulatory Framework for Microfinance Loans Directions, dated March 14, 2022. 15.2. Loans not exceeding ₹2.00 lakh provided by banks to SHG/JLG for activities other than agriculture or MSME, viz., loans for meeting social needs, construction or repair of house, construction of toilets or any viable common activity started by SHGs. 15.3. Loans to distressed persons [other than distressed farmers indebted to non-institutional lenders] not exceeding ₹1.00 lakh per borrower to prepay their debt to non-institutional lenders. 15.4. Loans sanctioned to State Sponsored Organisations for Scheduled Castes/ Scheduled Tribes for the specific purpose of purchase and supply of inputs and/or the marketing of the outputs of the beneficiaries of these organisations. 15.5. Loans up to ₹50 crore to Start-ups, as per definition of Ministry of Commerce and Industry, Govt. of India that are engaged in activities other than Agriculture or MSME. 16.1 Priority sector loans to the following borrowers will be considered as lending under Weaker Sections category:
16.2 Overdraft availed by PMJDY account holders as per limits and conditions prescribed by Department of Financial Services, Ministry of Finance from time to time may be classified under Weaker Sections. 16.3 In States, where one of the minority communities notified is, in fact, in majority, item (xi) will cover only the other notified minorities. These States/ Union Territories are Punjab, Meghalaya, Mizoram, Nagaland, Lakshadweep and Jammu & Kashmir. CHAPTER IV 17. Investments by banks in securitisation notes (not applicable to RRBs and UCBs) Investments by banks in ‘securitisation notes’, representing loans to various categories of priority sector, except 'others' category, are eligible for classification under respective categories of priority sector depending on the underlying assets provided:
18. Transfer of Assets through Direct Assignment /Outright purchase (not applicable to RRBs and UCBs) Assignment/outright purchase of pool of assets by banks representing loans under various categories of priority sector, except the ‘others’ category, will be eligible for classification under respective categories of priority sector provided:
19. Inter Bank Participation Certificates (IBPCs) (not applicable to UCBs)
20. Priority Sector Lending Certificates (PSLCs) The outstanding PSLCs bought by banks will be eligible for classification under respective categories of priority sector provided the underlying assets originated by banks are eligible to be classified as priority sector advances and fulfil the Reserve Bank of India guidelines on Priority Sector Lending Certificates issued vide Circular FIDD.CO.Plan.BC.23/04.09.001/2015-16 dated April 7, 2016. SFBs shall further be guided by the terms and conditions specified in Para 1.9 of DBR circular No. DBR.NBD.26/16.13.218/2016-17 dated October 6, 2016 on credit risk transfer and portfolio sales/purchases. 21. Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for on-lending (not applicable to RRBs, UCBs and LABs) 21.1 Banks other than SFBs are allowed to extend credit to registered NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised SRO for the sector, for on-lending to individuals and also to members of SHGs / JLGs. 21.2 With effect from May 5, 2021, SFBs are allowed to extend fresh credit to registered NBFC-MFIs and other MFIs (Societies, Trusts, etc.) which are members of RBI recognised ‘Self-Regulatory Organisation’ of the sector, and which have a ‘gross loan portfolio’ (GLP) of up to ₹500 crore as on March 31 of the previous year, for the purpose of on-lending to individuals. In case the GLP of the NBFC-MFIs/other MFIs exceeds the stipulated limit at a later date, all priority sector loans created prior to exceeding the GLP limit will continue to be classified by the SFBs as PSL till repayment/maturity, whichever is earlier. Bank credit as above will be allowed up to an overall limit of 10 percent of an individual bank’s total priority sector lending. These limits shall be computed by averaging across four quarters of the financial year, to determine adherence to the prescribed cap. 21.3 Loans disbursed by banks under para 21.1 and 21.2 above are eligible for categorisation as priority sector advance under respective categories viz., Agriculture, MSME, Social Infrastructure and Others, provided the MFIs adhere to the conditions prescribed in Chapter II (xx) and Chapter VIII of Master Directions DNBR PD.007 and Chapter II (xx) and Chapter IX of Master Directions DNBR PD.008/03.10.119/2016-17 dated September 1, 2016, as updated from time to time. 22. Bank loans to NBFCs for on-lending (not applicable to RRBs, UCBs, SFBs and LABs) Bank credit to registered NBFCs (other than MFIs) for on-lending will be eligible for classification as priority sector under respective categories subject to the following conditions:
23. Bank loans to HFCs for on-lending (not applicable to RRBs, SFBs and LABs) Bank credit to Housing Finance Companies (HFCs), approved by NHB for their refinance, for on-lending for the purpose of purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to an aggregate loan limit of ₹20 lakh per borrower. Banks should maintain necessary borrower-wise details of the underlying portfolio. Bank credit to NBFCs (including HFCs) for on-lending as applicable in para 22 and 23 above, will be allowed up to an overall limit of five percent of individual bank’s total priority sector lending. Banks shall compute the eligible portfolio under on-lending mechanism by averaging across four quarters, to determine adherence to the prescribed cap. 25. Co-lending by Banks and NBFCs to priority sector (not applicable to RRBs, UCBs, SFBs and LABs) All Scheduled Commercial Banks (excluding SFBs, RRBs, UCBs and LABs) are permitted to co-lend with all registered Non-Banking Financial Companies (including Housing Finance Companies) for lending to the priority sector. Detailed guidelines, in this regard, have been issued vide our circular FIDD.CO.Plan.BC.No.8/04.09.01/2020-21 dated November 5, 2020. For the sake of business continuity and to ensure uninterrupted flow of credit to the priority sector, banks may continue existing arrangement as per earlier guidelines on co-origination, issued vide our circular No. FIDD.CO.Plan.BC/08/04.09.01/2018-19 dated September 21, 2018, till the Board approved co-lending policy is put in place by them.
27. Monitoring of Priority Sector Lending targets To ensure continuous flow of credit to priority sector, the compliance of banks will be monitored on ‘quarterly’ basis. The data on priority sector advances shall be furnished by banks to FIDD, Central Office at quarterly and annual intervals as per the reporting format (quarterly and annual) , within fifteen days and one month, respectively from the date of ending of each quarter and financial year in terms of circular FIDD.CO.Plan.CO.BC.No.17/04.09.001/2016-17 dated October 6, 2016. In respect of RRBs, the data on priority sector advances, in the above format, shall be furnished to NABARD at quarterly and annual intervals. UCBs shall be guided by Master Direction – Reserve Bank of India (Filing of Supervisory Returns) Directions – 2024 dated February 27, 2024, as updated from time to time, as regards submission of data on priority sector advances. 28. Non-achievement of Priority Sector targets
29. Common guidelines for priority sector loans Banks should comply with the following common guidelines for all categories of advances under the priority sector.
List of Districts with comparatively high PSL credit
List of Districts with comparatively low PSL credit
An indicative list of eligible activities under Agriculture infrastructure and Ancillary activities is given below:
Indicative list of Permissible Activities under Food Processing Sector as shared by Ministry of Food Processing Industries (MoFPI)
Priority Sector achievement - Calculation of shortfall / excess Illustration: Tables No.1 and 2 below illustrate the method followed for computation of shortfall / excess in priority sector target achievement at the end of the financial year under the revised PSL guidelines. In the example given in Table - 1, the bank has overall shortfall of ₹2063 crore at the end of the financial year. In Table – 2, the bank has overall excess of ₹2293 crore at the end of the financial year. The Adjustments due to weightage on incremental credit in identified districts as per para 7, will be as per the data submitted by banks in the Automated Data Extraction Project (ADEPT). The same method will be followed for calculating the achievement of quarterly and yearly priority sector sub-targets. Note: The computation of priority sector targets/sub-targets achievement will be based on the ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposures, whichever is higher, as at the corresponding date of the preceding year. LIST OF CIRCULARS CONSOLIDATED
|
RBI/FIDD/2020-21/72 September 04, 2020 The Chairman / Managing Director/ Madam/Dear Sir, Master Directions – Priority Sector Lending (PSL) – Targets and Classification. The Priority Sector Lending (PSL) guidelines issued by Reserve Bank of India were last reviewed for Commercial Banks in April 2015 and for UCBs in May 2018 respectively. With an objective to harmonise various instructions issued to Commercial Banks, SFBs, RRBs, UCBs and LABs; align these guidelines with emerging national priorities and bring sharper focus on inclusive development, it was decided to comprehensively review the PSL guidelines. The revised guidelines also aim to encourage and support environment friendly lending policies to help achieve Sustainable Development Goals (SDGs). This review also took into account the recommendations made by the ‘Expert Committee on Micro, Small and Medium Enterprises (Chairman: Shri U.K. Sinha) and the ‘Internal Working Group to Review Agriculture Credit’ (Chairman: Shri M. K. Jain) apart from discussions with all stakeholders. Further, these Master Directions encompass the revised guidelines on PSL for all Commercial banks, RRBs, SFBs, UCBs and LABs and, accordingly, supersede the earlier Master Directions on PSL issued separately for Scheduled Commercial Banks, RRBs, SFBs and guidelines issued for UCBs, respectively. The list of circulars consolidated in these Master Directions is indicated in the Appendix. The Master Directions have been placed on the RBI website www.rbi.org.in. Yours faithfully, (Sonali Sen Gupta) INDEX Master Directions- Reserve Bank of India (Priority Sector Lending – In exercise of the powers conferred by Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949, the Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified. CHAPTER – I 1. Short Title and Commencement 1.1 These Directions shall be called the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2020. 1.2 These Directions shall come into effect on the day they are placed on the official website of the Reserve Bank of India. The provisions of these Directions shall apply to every Commercial Bank [including Regional Rural Bank (RRB), Small Finance Bank (SFB), Local Area Bank] and Primary (Urban) Co-operative Bank (UCB) other than Salary Earners’ Bank. 3. Definitions/ Clarifications 3.1 In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below:
3.2 All other expressions, unless defined herein, shall have the same meaning as has been assigned to them under the Banking Regulation Act, 1949 or the Reserve Bank of India Act, 1934 or any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be. 3.3 Banks must ensure that loans extended under priority sector are for approved purposes and the end use is continuously monitored. The banks should put in place proper internal controls and systems in this regard. CHAPTER – II 4. The categories under priority sector are as follows: The details of eligible activities under the above categories are specified in Chapter III. 5. Targets /Sub-targets for Priority sector 5.1 The targets and sub-targets set under priority sector lending, to be computed on the basis of the ANBC/ CEOBE as applicable as on the corresponding date of the preceding year, are as under:
5.2 The targets for lending to SMFs and for Weaker Sections shall be revised upwards from FY 2021-22 onwards as follows:
5.3 UCBs shall comply with the stipulated targets as under:
5.4 All domestic banks (other than UCBs) and foreign banks with more than 20 branches are directed to ensure that the overall lending to Non-Corporate Farmers (NCFs) does not fall below the system-wide average of the last three years’ achievement which will be separately notified every year. The applicable target for lending to the non-corporate farmers for FY 2022-23 will be 13.78% of ANBC or CEOBE whichever is higher. All efforts should be made by banks to increase the Farm Credit (as per para 8.1) higher than the NCF target. 6. Computation of Adjusted Net Bank Credit (ANBC) 6.1 For the purpose of priority sector lending, ANBC denotes the outstanding Bank Credit in India [As prescribed in item No.VI of Form ‘A’ under Section 42 (2) of the RBI Act, 1934] and computed as follows:
6.2 For the purpose of calculation of CEOBE, banks shall be guided by the Master Circular on Exposure Norms issued by Department of Regulation, RBI vide DBR.No.Dir.BC.12/13.03.00/ 2015-16 dated July 1, 2015 and as updated from time to time. UCBs shall be guided by the relevant provisions of the Master Circular dated July 1, 2015 on ‘Prudential Norms on Capital Adequacy - UCBs’ issued by Reserve Bank of India. 6.3 SFBs shall be further guided by Para 6.5 (ii to vii) of the Operating Guidelines for Small Finance Banks issued by Department of Regulation ( RBI/2016-17/81 DBR.NBD. No.26/16.13.218/2016-17 dated October 06, 2016), pertaining to treatment of grandfathered loans, for computation of ANBC. 6.4 While calculating Net Bank Credit as above, if banks subtract prudential write off at Corporate/Head Office level, it must be ensured that the credit to priority sector and all other sub-sectors so written off should also be subtracted category wise from priority sector and sub-target achievement. Wherever, investments or any other items which are treated as eligible for classification under priority sector target/sub-target achievement, the same should also form part of Adjusted Net Bank Credit. 6.5 All the banks have to adhere to the respective licencing guidelines and operating guidelines issued by the Department of Regulation, RBI and updated from time to time 7. Adjustments for weights in PSL Achievement To address regional disparities in the flow of priority sector credit at the district level, it has been decided to rank districts on the basis of per capita credit flow to priority sector and build an incentive framework for districts with comparatively lower flow of credit and a dis-incentive framework for districts with comparatively higher flow of priority sector credit. Accordingly, from FY 2021-22 onwards, a higher weight (125%) would be assigned to the incremental priority sector credit in the identified districts where the credit flow is comparatively lower (per capita PSL less than ₹6000), and a lower weight (90%) would be assigned for incremental priority sector credit in the identified districts where the credit flow is comparatively higher (per capita PSL greater than ₹25,000). The list of both categories of districts is given in Annex IA & IB. This list will be valid for a period up to FY 2023-24 and will be reviewed thereafter. The districts other than those mentioned in Annex IA and IB will continue to have existing weightage of 100%. The banks should continue to report the actual outstanding amount in QPSA returns as hitherto. Adjustments for weights to incremental PSL credit will be done by RBI, based on reporting of district wise credit flow to FIDD, CO through the ADEPT database. RRBs, UCBs, LABs and foreign banks (including WoS) would be exempted from adjustments of weights in PSL achievement due to their currently limited area of operation/catering to a niche segment. CHAPTER – III The lending to agriculture sector will include Farm Credit (Agriculture and Allied Activities), lending for Agriculture Infrastructure and Ancillary Activities. 8.1 Farm Credit - Individual farmers Loans to individual farmers [including Self Help Groups (SHGs) or Joint Liability Groups (JLGs) i.e. groups of individual farmers, provided banks maintain disaggregated data of such loans] and Proprietorship firms of farmers, directly engaged in Agriculture and Allied Activities, viz. dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture. This will include:
8.2 Farm Credit - Corporate farmers, Farmer Producer Organisations (FPOs)/(FPC) Companies of Individual Farmers, Partnership firms and Co-operatives of farmers engaged in Agriculture and Allied Activities (a) Loans for the following activities will be subject to an aggregate limit of ₹2 crore per borrowing entity:
(b) Loans up to ₹75 lakh against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months against NWRs/eNWRs and up to ₹50 lakh against warehouse receipts other than NWRs/eNWRs. (c) Loans up to ₹5 crore per borrowing entity to FPOs/FPCs undertaking farming with assured marketing of their produce at a pre-determined price. (d) UCBs are not permitted to lend to co-operatives of farmers. 8.3 Agriculture Infrastructure Loans for agriculture infrastructure will be subject to an aggregate sanctioned limit of ₹100 crore per borrower from the banking system. List of activities is furnished in Annex II. 8.4 Ancillary Services 8.4.1 Following loans under ancillary services will be subject to limits prescribed as under:
8.4.2 Outstanding deposits under RIDF and other eligible funds with NABARD on account of priority sector shortfall. 8.4.3 The eligible activities under ancillary services and food processing is given in Annex II and Annex III, respectively. 8.5 Small and Marginal Farmers (SMFs) For the purpose of computation of achievement of the sub-target, Small and Marginal Farmers will include the following:
8.6 Lending by banks to NBFCs and MFIs for on-lending in agriculture
9. Micro, Small and Medium Enterprises (MSMEs) The definition of MSMEs will be as per Government of India (GoI), Gazette Notification S.O. 2119 (E) dated June 26, 2020 read with circular RBI/2020-2021/10 FIDD.MSME & NFS.BC.No.3/06.02.31/2020-21 read with FIDD.MSME & NFS. BC. No.4/06.02.31/2020-21 dated July 2, 2020, August 21, 2020 respectively on ‘Credit flow to Micro, Small and Medium Enterprises Sector’ and updated from time to time. Further, such MSMEs should be engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 or engaged in providing or rendering of any service or services. All bank loans to MSMEs conforming to the above guidelines qualify for classification under priority sector lending. 9.1 Factoring Transactions (not applicable to RRBs and UCBs)
9.2 Khadi and Village Industries Sector (KVI) All loans to units in the KVI sector will be eligible for classification under the sub-target of 7.5 percent prescribed for Micro Enterprises under priority sector. 9.3 Other Finance to MSMEs
10. Export Credit (not applicable to RRBs and LABs) Export credit under agriculture and MSME sectors are allowed to be classified as PSL in the respective categories viz. agriculture and MSME. Export Credit (other than in agriculture and MSME) will be allowed to be classified as priority sector as per the following table:
10.1 Export credit includes pre-shipment and post-shipment export credit (excluding off-balance sheet items) as defined in Master Circular on Rupee / Foreign Currency Export Credit and Customer Service to Exporters issued by Department of Regulation, RBI vide DBR No.DIR.BC.14/04.02.002/2015-16 dated July 1, 2015 and updated from time to time. Loans to individuals for educational purposes, including vocational courses, not exceeding ₹ 20 lakh will be considered as eligible for priority sector classification. Loans currently classified as priority sector will continue till maturity. 12.1 Bank loans to Housing sector as per limits prescribed below are eligible for priority sector classification:
12.2 Loans up to ₹10 lakh in metropolitan centres and up to ₹6 lakh in other centres for repairs to damaged dwelling units conforming to the overall cost of the dwelling unit as prescribed in para 12.1. 12.3 Bank loans to any governmental agency for construction of dwelling units or for slum clearance and rehabilitation of slum dwellers subject to dwelling units with carpet area of not more than 60 sq.m. 12.4 Bank loans for affordable housing projects using at least 50% of FAR/FSI for dwelling units with carpet area of not more than 60 sq.m. 12.5 Bank loans to HFCs (approved by NHB for their refinance) for on-lending, up to ₹20 lakh for individual borrowers, for purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to conditions specified in para 23 and 24. 12.6 Outstanding deposits with NHB on account of priority sector shortfall. Bank loans to social infrastructure sector as per limits prescribed below are eligible for priority sector classification 13.1. Bank loans up to a limit of ₹5 crore per borrower for setting up schools, drinking water facilities and sanitation facilities including construction/ refurbishment of household toilets and water improvements at household level, etc. and loans up to a limit of ₹10 crore per borrower for building health care facilities including under ‘Ayushman Bharat’ in Tier II to Tier VI centres. In case of UCBs, the above limits are applicable only in centres having a population of less than one lakh. 13.2. # Bank loans to MFIs extended for on-lending to individuals and also to members of SHGs/JLGs for water and sanitation facilities subject to the criteria laid down in paragraph 21 of these Master Directions. # not applicable to RRBs, UCBs and SFBs. Bank loans up to a limit of ₹30 crore to borrowers for purposes like solar based power generators, biomass-based power generators, wind mills, micro-hydel plants and for non-conventional energy based public utilities, viz., street lighting systems and remote village electrification etc., will be eligible for Priority Sector classification. For individual households, the loan limit will be ₹10 lakh per borrower. The following loans as per the prescribed limits are eligible for priority sector classification: 15.1. Loans provided directly by banks to individuals and individual members of SHG/JLG satisfying the criteria as prescribed in Master Direction on Regulatory Framework for Microfinance Loans Directions, dated March 14, 2022. 15.2. Loans not exceeding ₹2.00 lakh provided by banks to SHG/JLG for activities other than agriculture or MSME, viz., loans for meeting social needs, construction or repair of house, construction of toilets or any viable common activity started by SHGs. 15.3. Loans to distressed persons [other than distressed farmers indebted to non-institutional lenders] not exceeding ₹1.00 lakh per borrower to prepay their debt to non-institutional lenders. 15.4. Loans sanctioned to State Sponsored Organisations for Scheduled Castes/ Scheduled Tribes for the specific purpose of purchase and supply of inputs and/or the marketing of the outputs of the beneficiaries of these organisations. 15.5. Loans up to ₹50 crore to Start-ups, as per definition of Ministry of Commerce and Industry, Govt. of India that are engaged in activities other than Agriculture or MSME. 16.1 Priority sector loans to the following borrowers will be considered as lending under Weaker Sections category:
16.2 Overdraft availed by PMJDY account holders as per limits and conditions prescribed by Department of Financial Services, Ministry of Finance from time to time may be classified under Weaker Sections. 16.3 In States, where one of the minority communities notified is, in fact, in majority, item (xi) will cover only the other notified minorities. These States/ Union Territories are Punjab, Meghalaya, Mizoram, Nagaland, Lakshadweep and Jammu & Kashmir. CHAPTER IV 17. Investments by banks in securitisation notes (not applicable to RRBs and UCBs) Investments by banks in ‘securitisation notes’, representing loans to various categories of priority sector, except 'others' category, are eligible for classification under respective categories of priority sector depending on the underlying assets provided:
18. Transfer of Assets through Direct Assignment /Outright purchase (not applicable to RRBs and UCBs) Assignment/outright purchase of pool of assets by banks representing loans under various categories of priority sector, except the ‘others’ category, will be eligible for classification under respective categories of priority sector provided:
19. Inter Bank Participation Certificates (IBPCs) (not applicable to UCBs)
20. Priority Sector Lending Certificates (PSLCs) The outstanding PSLCs bought by banks will be eligible for classification under respective categories of priority sector provided the underlying assets originated by banks are eligible to be classified as priority sector advances and fulfil the Reserve Bank of India guidelines on Priority Sector Lending Certificates issued vide Circular FIDD.CO.Plan.BC.23/04.09.001/2015-16 dated April 7, 2016. SFBs shall further be guided by the terms and conditions specified in Para 1.9 of DBR circular No. DBR.NBD.26/16.13.218/2016-17 dated October 6, 2016 on credit risk transfer and portfolio sales/purchases. 21. Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for on-lending (not applicable to RRBs, UCBs and LABs) 21.1 Banks other than SFBs are allowed to extend credit to registered NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised SRO for the sector, for on-lending to individuals and also to members of SHGs / JLGs. 21.2 With effect from May 5, 2021, SFBs are allowed to extend fresh credit to registered NBFC-MFIs and other MFIs (Societies, Trusts, etc.) which are members of RBI recognised ‘Self-Regulatory Organisation’ of the sector, and which have a ‘gross loan portfolio’ (GLP) of up to ₹500 crore as on March 31 of the previous year, for the purpose of on-lending to individuals. In case the GLP of the NBFC-MFIs/other MFIs exceeds the stipulated limit at a later date, all priority sector loans created prior to exceeding the GLP limit will continue to be classified by the SFBs as PSL till repayment/maturity, whichever is earlier. Bank credit as above will be allowed up to an overall limit of 10 percent of an individual bank’s total priority sector lending. These limits shall be computed by averaging across four quarters of the financial year, to determine adherence to the prescribed cap. 21.3 Loans disbursed by banks under para 21.1 and 21.2 above are eligible for categorisation as priority sector advance under respective categories viz., Agriculture, MSME, Social Infrastructure and Others, provided the MFIs adhere to the conditions prescribed in Chapter II (xx) and Chapter VIII of Master Directions DNBR PD.007 and Chapter II (xx) and Chapter IX of Master Directions DNBR PD.008/03.10.119/2016-17 dated September 1, 2016, as updated from time to time. 22. Bank loans to NBFCs for on-lending (not applicable to RRBs, UCBs, SFBs and LABs) Bank credit to registered NBFCs (other than MFIs) for on-lending will be eligible for classification as priority sector under respective categories subject to the following conditions:
23. Bank loans to HFCs for on-lending (not applicable to RRBs, SFBs and LABs) Bank credit to Housing Finance Companies (HFCs), approved by NHB for their refinance, for on-lending for the purpose of purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to an aggregate loan limit of ₹20 lakh per borrower. Banks should maintain necessary borrower-wise details of the underlying portfolio. Bank credit to NBFCs (including HFCs) for on-lending as applicable in para 22 and 23 above, will be allowed up to an overall limit of five percent of individual bank’s total priority sector lending. Banks shall compute the eligible portfolio under on-lending mechanism by averaging across four quarters, to determine adherence to the prescribed cap. 25. Co-lending by Banks and NBFCs to priority sector (not applicable to RRBs, UCBs, SFBs and LABs) All Scheduled Commercial Banks (excluding SFBs, RRBs, UCBs and LABs) are permitted to co-lend with all registered Non-Banking Financial Companies (including Housing Finance Companies) for lending to the priority sector. Detailed guidelines, in this regard, have been issued vide our circular FIDD.CO.Plan.BC.No.8/04.09.01/2020-21 dated November 5, 2020. For the sake of business continuity and to ensure uninterrupted flow of credit to the priority sector, banks may continue existing arrangement as per earlier guidelines on co-origination, issued vide our circular No. FIDD.CO.Plan.BC/08/04.09.01/2018-19 dated September 21, 2018, till the Board approved co-lending policy is put in place by them.
27. Monitoring of Priority Sector Lending targets To ensure continuous flow of credit to priority sector, the compliance of banks will be monitored on ‘quarterly’ basis. The data on priority sector advances is required to be furnished by banks to FIDD, Central Office at quarterly and annual intervals as per the reporting format (quarterly and annual) , within fifteen days and one month, respectively from the date of ending of each quarter and financial year in terms of circular FIDD.CO.Plan.CO.BC.No.17/04.09.001/2016-17 dated October 6, 2016. In respect of RRBs, the data on priority sector advances, in the above format, must be furnished to NABARD at quarterly and annual intervals. In respect of UCBs, the data on priority sector advances in the reporting formats ‘Statement I’ and ‘ Statement II (Part A to D)’ shall be furnished at quarterly and annual intervals, to the Regional Office of DoS, RBI. 28. Non-achievement of Priority Sector targets
29. Common guidelines for priority sector loans Banks should comply with the following common guidelines for all categories of advances under the priority sector.
List of Districts with comparatively high PSL credit
List of Districts with comparatively low PSL credit
Indicative list of Permissible Activities under Food Processing Sector as shared by Ministry of Food Processing Industries (MoFPI)
Priority Sector achievement - Calculation of shortfall / excess Illustration: Tables No.1 and 2 below illustrate the method followed for computation of shortfall / excess in priority sector target achievement at the end of the financial year under the revised PSL guidelines. In the example given in Table - 1, the bank has overall shortfall of ₹2063 crore at the end of the financial year. In Table – 2, the bank has overall excess of ₹2293 crore at the end of the financial year. The Adjustments due to weightage on incremental credit in identified districts as per para 7, will be as per the data submitted by banks in the Automated Data Extraction Project (ADEPT). The same method will be followed for calculating the achievement of quarterly and yearly priority sector sub-targets. Note: The computation of priority sector targets/sub-targets achievement will be based on the ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposures, whichever is higher, as at the corresponding date of the preceding year. LIST OF CIRCULARS CONSOLIDATED
|
RBI/FIDD/2020-21/72 September 04, 2020 The Chairman / Managing Director/ Madam/Dear Sir, Master Directions – Priority Sector Lending (PSL) – Targets and Classification. The Priority Sector Lending (PSL) guidelines issued by Reserve Bank of India were last reviewed for Commercial Banks in April 2015 and for UCBs in May 2018 respectively. With an objective to harmonise various instructions issued to Commercial Banks, SFBs, RRBs, UCBs and LABs; align these guidelines with emerging national priorities and bring sharper focus on inclusive development, it was decided to comprehensively review the PSL guidelines. The revised guidelines also aim to encourage and support environment friendly lending policies to help achieve Sustainable Development Goals (SDGs). This review also took into account the recommendations made by the ‘Expert Committee on Micro, Small and Medium Enterprises (Chairman: Shri U.K. Sinha) and the ‘Internal Working Group to Review Agriculture Credit’ (Chairman: Shri M. K. Jain) apart from discussions with all stakeholders. Further, these Master Directions encompass the revised guidelines on PSL for all Commercial banks, RRBs, SFBs, UCBs and LABs and, accordingly, supersede the earlier Master Directions on PSL issued separately for Scheduled Commercial Banks, RRBs, SFBs and guidelines issued for UCBs, respectively. The list of circulars consolidated in these Master Directions is indicated in the Appendix. The Master Directions have been placed on the RBI website www.rbi.org.in. Yours faithfully, (Sonali Sen Gupta) INDEX Master Directions- Reserve Bank of India (Priority Sector Lending – In exercise of the powers conferred by Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949, the Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified. CHAPTER – I 1. Short Title and Commencement 1.1 These Directions shall be called the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2020. 1.2 These Directions shall come into effect on the day they are placed on the official website of the Reserve Bank of India. The provisions of these Directions shall apply to every Commercial Bank [including Regional Rural Bank (RRB), Small Finance Bank (SFB), Local Area Bank] and Primary (Urban) Co-operative Bank (UCB) other than Salary Earners’ Bank. 3. Definitions/ Clarifications 3.1 In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below:
3.2 All other expressions, unless defined herein, shall have the same meaning as has been assigned to them under the Banking Regulation Act, 1949 or the Reserve Bank of India Act, 1934 or any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be. 3.3 Banks must ensure that loans extended under priority sector are for approved purposes and the end use is continuously monitored. The banks should put in place proper internal controls and systems in this regard. CHAPTER – II 4. The categories under priority sector are as follows: The details of eligible activities under the above categories are specified in Chapter III. 5. Targets /Sub-targets for Priority sector 5.1 The targets and sub-targets set under priority sector lending, to be computed on the basis of the ANBC/ CEOBE as applicable as on the corresponding date of the preceding year, are as under:
5.2 The targets for lending to SMFs and for Weaker Sections shall be revised upwards from FY 2021-22 onwards as follows:
5.3 UCBs shall comply with the stipulated targets as under:
5.4 All domestic banks (other than UCBs) and foreign banks with more than 20 branches are directed to ensure that the overall lending to Non-Corporate Farmers (NCFs) does not fall below the system-wide average of the last three years’ achievement which will be separately notified every year. The applicable target for lending to the non-corporate farmers for FY 2022-23 will be 13.78% of ANBC or CEOBE whichever is higher. All efforts should be made by banks to increase the Farm Credit (as per para 8.1) higher than the NCF target. 6. Computation of Adjusted Net Bank Credit (ANBC) 6.1 For the purpose of priority sector lending, ANBC denotes the outstanding Bank Credit in India [As prescribed in item No.VI of Form ‘A’ under Section 42 (2) of the RBI Act, 1934] and computed as follows:
6.2 For the purpose of calculation of CEOBE, banks shall be guided by the Master Circular on Exposure Norms issued by Department of Regulation, RBI vide DBR.No.Dir.BC.12/13.03.00/ 2015-16 dated July 1, 2015 and as updated from time to time. UCBs shall be guided by the relevant provisions of the Master Circular dated July 1, 2015 on ‘Prudential Norms on Capital Adequacy - UCBs’ issued by Reserve Bank of India. 6.3 SFBs shall be further guided by Para 6.5 (ii to vii) of the Operating Guidelines for Small Finance Banks issued by Department of Regulation ( RBI/2016-17/81 DBR.NBD. No.26/16.13.218/2016-17 dated October 06, 2016), pertaining to treatment of grandfathered loans, for computation of ANBC. 6.4 While calculating Net Bank Credit as above, if banks subtract prudential write off at Corporate/Head Office level, it must be ensured that the credit to priority sector and all other sub-sectors so written off should also be subtracted category wise from priority sector and sub-target achievement. Wherever, investments or any other items which are treated as eligible for classification under priority sector target/sub-target achievement, the same should also form part of Adjusted Net Bank Credit. 6.5 All the banks have to adhere to the respective licencing guidelines and operating guidelines issued by the Department of Regulation, RBI and updated from time to time 7. Adjustments for weights in PSL Achievement To address regional disparities in the flow of priority sector credit at the district level, it has been decided to rank districts on the basis of per capita credit flow to priority sector and build an incentive framework for districts with comparatively lower flow of credit and a dis-incentive framework for districts with comparatively higher flow of priority sector credit. Accordingly, from FY 2021-22 onwards, a higher weight (125%) would be assigned to the incremental priority sector credit in the identified districts where the credit flow is comparatively lower (per capita PSL less than ₹6000), and a lower weight (90%) would be assigned for incremental priority sector credit in the identified districts where the credit flow is comparatively higher (per capita PSL greater than ₹25,000). The list of both categories of districts is given in Annex IA & IB. This list will be valid for a period up to FY 2023-24 and will be reviewed thereafter. The districts other than those mentioned in Annex IA and IB will continue to have existing weightage of 100%. The banks should continue to report the actual outstanding amount in QPSA returns as hitherto. Adjustments for weights to incremental PSL credit will be done by RBI, based on reporting of district wise credit flow to FIDD, CO through the ADEPT database. RRBs, UCBs, LABs and foreign banks (including WoS) would be exempted from adjustments of weights in PSL achievement due to their currently limited area of operation/catering to a niche segment. CHAPTER – III The lending to agriculture sector will include Farm Credit (Agriculture and Allied Activities), lending for Agriculture Infrastructure and Ancillary Activities. 8.1 Farm Credit - Individual farmers Loans to individual farmers [including Self Help Groups (SHGs) or Joint Liability Groups (JLGs) i.e. groups of individual farmers, provided banks maintain disaggregated data of such loans] and Proprietorship firms of farmers, directly engaged in Agriculture and Allied Activities, viz. dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture. This will include:
8.2 Farm Credit - Corporate farmers, Farmer Producer Organisations (FPOs)/(FPC) Companies of Individual Farmers, Partnership firms and Co-operatives of farmers engaged in Agriculture and Allied Activities (a) Loans for the following activities will be subject to an aggregate limit of ₹2 crore per borrowing entity:
(b) Loans up to ₹75 lakh against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months against NWRs/eNWRs and up to ₹50 lakh against warehouse receipts other than NWRs/eNWRs. (c) Loans up to ₹5 crore per borrowing entity to FPOs/FPCs undertaking farming with assured marketing of their produce at a pre-determined price. (d) UCBs are not permitted to lend to co-operatives of farmers. 8.3 Agriculture Infrastructure Loans for agriculture infrastructure will be subject to an aggregate sanctioned limit of ₹100 crore per borrower from the banking system. List of activities is furnished in Annex II. 8.4 Ancillary Services 8.4.1 Following loans under ancillary services will be subject to limits prescribed as under:
8.4.2 Outstanding deposits under RIDF and other eligible funds with NABARD on account of priority sector shortfall. 8.4.3 The eligible activities under ancillary services and food processing is given in Annex II and Annex III, respectively. 8.5 Small and Marginal Farmers (SMFs) For the purpose of computation of achievement of the sub-target, Small and Marginal Farmers will include the following:
8.6 Lending by banks to NBFCs and MFIs for on-lending in agriculture
9. Micro, Small and Medium Enterprises (MSMEs) The definition of MSMEs will be as per Government of India (GoI), Gazette Notification S.O. 2119 (E) dated June 26, 2020 read with circular RBI/2020-2021/10 FIDD.MSME & NFS.BC.No.3/06.02.31/2020-21 read with FIDD.MSME & NFS. BC. No.4/06.02.31/2020-21 dated July 2, 2020, August 21, 2020 respectively on ‘Credit flow to Micro, Small and Medium Enterprises Sector’ and updated from time to time. Further, such MSMEs should be engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 or engaged in providing or rendering of any service or services. All bank loans to MSMEs conforming to the above guidelines qualify for classification under priority sector lending. 9.1 Factoring Transactions (not applicable to RRBs and UCBs)
9.2 Khadi and Village Industries Sector (KVI) All loans to units in the KVI sector will be eligible for classification under the sub-target of 7.5 percent prescribed for Micro Enterprises under priority sector. 9.3 Other Finance to MSMEs
10. Export Credit (not applicable to RRBs and LABs) Export credit under agriculture and MSME sectors are allowed to be classified as PSL in the respective categories viz. agriculture and MSME. Export Credit (other than in agriculture and MSME) will be allowed to be classified as priority sector as per the following table:
10.1 Export credit includes pre-shipment and post-shipment export credit (excluding off-balance sheet items) as defined in Master Circular on Rupee / Foreign Currency Export Credit and Customer Service to Exporters issued by Department of Regulation, RBI vide DBR No.DIR.BC.14/04.02.002/2015-16 dated July 1, 2015 and updated from time to time. Loans to individuals for educational purposes, including vocational courses, not exceeding ₹ 20 lakh will be considered as eligible for priority sector classification. Loans currently classified as priority sector will continue till maturity. 12.1 Bank loans to Housing sector as per limits prescribed below are eligible for priority sector classification:
12.2 Loans up to ₹10 lakh in metropolitan centres and up to ₹6 lakh in other centres for repairs to damaged dwelling units conforming to the overall cost of the dwelling unit as prescribed in para 12.1. 12.3 Bank loans to any governmental agency for construction of dwelling units or for slum clearance and rehabilitation of slum dwellers subject to dwelling units with carpet area of not more than 60 sq.m. 12.4 Bank loans for affordable housing projects using at least 50% of FAR/FSI for dwelling units with carpet area of not more than 60 sq.m. 12.5 Bank loans to HFCs (approved by NHB for their refinance) for on-lending, up to ₹20 lakh for individual borrowers, for purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to conditions specified in para 23 and 24. 12.6 Outstanding deposits with NHB on account of priority sector shortfall. Bank loans to social infrastructure sector as per limits prescribed below are eligible for priority sector classification 13.1. Bank loans up to a limit of ₹5 crore per borrower for setting up schools, drinking water facilities and sanitation facilities including construction/ refurbishment of household toilets and water improvements at household level, etc. and loans up to a limit of ₹10 crore per borrower for building health care facilities including under ‘Ayushman Bharat’ in Tier II to Tier VI centres. In case of UCBs, the above limits are applicable only in centres having a population of less than one lakh. 13.2. # Bank loans to MFIs extended for on-lending to individuals and also to members of SHGs/JLGs for water and sanitation facilities subject to the criteria laid down in paragraph 21 of these Master Directions. # not applicable to RRBs, UCBs and SFBs. Bank loans up to a limit of ₹30 crore to borrowers for purposes like solar based power generators, biomass-based power generators, wind mills, micro-hydel plants and for non-conventional energy based public utilities, viz., street lighting systems and remote village electrification etc., will be eligible for Priority Sector classification. For individual households, the loan limit will be ₹10 lakh per borrower. The following loans as per the prescribed limits are eligible for priority sector classification: 15.1. Loans provided directly by banks to individuals and individual members of SHG/JLG satisfying the criteria as prescribed in Master Direction on Regulatory Framework for Microfinance Loans Directions, dated March 14, 2022. 15.2. Loans not exceeding ₹2.00 lakh provided by banks to SHG/JLG for activities other than agriculture or MSME, viz., loans for meeting social needs, construction or repair of house, construction of toilets or any viable common activity started by SHGs. 15.3. Loans to distressed persons [other than distressed farmers indebted to non-institutional lenders] not exceeding ₹1.00 lakh per borrower to prepay their debt to non-institutional lenders. 15.4. Loans sanctioned to State Sponsored Organisations for Scheduled Castes/ Scheduled Tribes for the specific purpose of purchase and supply of inputs and/or the marketing of the outputs of the beneficiaries of these organisations. 15.5. Loans up to ₹50 crore to Start-ups, as per definition of Ministry of Commerce and Industry, Govt. of India that are engaged in activities other than Agriculture or MSME. 16.1 Priority sector loans to the following borrowers will be considered as lending under Weaker Sections category:
16.2 Overdraft availed by PMJDY account holders as per limits and conditions prescribed by Department of Financial Services, Ministry of Finance from time to time may be classified under Weaker Sections. 16.3 In States, where one of the minority communities notified is, in fact, in majority, item (xi) will cover only the other notified minorities. These States/ Union Territories are Punjab, Meghalaya, Mizoram, Nagaland, Lakshadweep and Jammu & Kashmir. CHAPTER IV 17. Investments by banks in securitisation notes (not applicable to RRBs and UCBs) Investments by banks in ‘securitisation notes’, representing loans to various categories of priority sector, except 'others' category, are eligible for classification under respective categories of priority sector depending on the underlying assets provided:
18. Transfer of Assets through Direct Assignment /Outright purchase (not applicable to RRBs and UCBs) Assignment/outright purchase of pool of assets by banks representing loans under various categories of priority sector, except the ‘others’ category, will be eligible for classification under respective categories of priority sector provided:
19. Inter Bank Participation Certificates (IBPCs) (not applicable to UCBs)
20. Priority Sector Lending Certificates (PSLCs) The outstanding PSLCs bought by banks will be eligible for classification under respective categories of priority sector provided the underlying assets originated by banks are eligible to be classified as priority sector advances and fulfil the Reserve Bank of India guidelines on Priority Sector Lending Certificates issued vide Circular FIDD.CO.Plan.BC.23/04.09.001/2015-16 dated April 7, 2016. SFBs shall further be guided by the terms and conditions specified in Para 1.9 of DBR circular No. DBR.NBD.26/16.13.218/2016-17 dated October 6, 2016 on credit risk transfer and portfolio sales/purchases. 21. Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for on-lending (not applicable to RRBs, UCBs and LABs) 21.1 Banks other than SFBs are allowed to extend credit to registered NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised SRO for the sector, for on-lending to individuals and also to members of SHGs / JLGs. 21.2 With effect from May 5, 2021, SFBs are allowed to extend fresh credit to registered NBFC-MFIs and other MFIs (Societies, Trusts, etc.) which are members of RBI recognised ‘Self-Regulatory Organisation’ of the sector, and which have a ‘gross loan portfolio’ (GLP) of up to ₹500 crore as on March 31 of the previous year, for the purpose of on-lending to individuals. In case the GLP of the NBFC-MFIs/other MFIs exceeds the stipulated limit at a later date, all priority sector loans created prior to exceeding the GLP limit will continue to be classified by the SFBs as PSL till repayment/maturity, whichever is earlier. Bank credit as above will be allowed up to an overall limit of 10 percent of an individual bank’s total priority sector lending. These limits shall be computed by averaging across four quarters of the financial year, to determine adherence to the prescribed cap. 21.3 Loans disbursed by banks under para 21.1 and 21.2 above are eligible for categorisation as priority sector advance under respective categories viz., Agriculture, MSME, Social Infrastructure and Others, provided the MFIs adhere to the conditions prescribed in Chapter II (xx) and Chapter VIII of Master Directions DNBR PD.007 and Chapter II (xx) and Chapter IX of Master Directions DNBR PD.008/03.10.119/2016-17 dated September 1, 2016, as updated from time to time. 22. Bank loans to NBFCs for on-lending (not applicable to RRBs, UCBs, SFBs and LABs) Bank credit to registered NBFCs (other than MFIs) for on-lending will be eligible for classification as priority sector under respective categories subject to the following conditions:
23. Bank loans to HFCs for on-lending (not applicable to RRBs, SFBs and LABs) Bank credit to Housing Finance Companies (HFCs), approved by NHB for their refinance, for on-lending for the purpose of purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to an aggregate loan limit of ₹20 lakh per borrower. Banks should maintain necessary borrower-wise details of the underlying portfolio. Bank credit to NBFCs (including HFCs) for on-lending as applicable in para 22 and 23 above, will be allowed up to an overall limit of five percent of individual bank’s total priority sector lending. Banks shall compute the eligible portfolio under on-lending mechanism by averaging across four quarters, to determine adherence to the prescribed cap. 25. Co-lending by Banks and NBFCs to priority sector (not applicable to RRBs, UCBs, SFBs and LABs) All Scheduled Commercial Banks (excluding SFBs, RRBs, UCBs and LABs) are permitted to co-lend with all registered Non-Banking Financial Companies (including Housing Finance Companies) for lending to the priority sector. Detailed guidelines, in this regard, have been issued vide our circular FIDD.CO.Plan.BC.No.8/04.09.01/2020-21 dated November 5, 2020. For the sake of business continuity and to ensure uninterrupted flow of credit to the priority sector, banks may continue existing arrangement as per earlier guidelines on co-origination, issued vide our circular No. FIDD.CO.Plan.BC/08/04.09.01/2018-19 dated September 21, 2018, till the Board approved co-lending policy is put in place by them.
27. Monitoring of Priority Sector Lending targets To ensure continuous flow of credit to priority sector, the compliance of banks will be monitored on ‘quarterly’ basis. The data on priority sector advances is required to be furnished by banks to FIDD, Central Office at quarterly and annual intervals as per the reporting format (quarterly and annual) , within fifteen days and one month, respectively from the date of ending of each quarter and financial year in terms of circular FIDD.CO.Plan.CO.BC.No.17/04.09.001/2016-17 dated October 6, 2016. In respect of RRBs, the data on priority sector advances, in the above format, must be furnished to NABARD at quarterly and annual intervals. In respect of UCBs, the data on priority sector advances in the reporting formats ‘Statement I’ and ‘ Statement II (Part A to D)’ shall be furnished at quarterly and annual intervals, to the Regional Office of DoS, RBI. 28. Non-achievement of Priority Sector targets
29. Common guidelines for priority sector loans Banks should comply with the following common guidelines for all categories of advances under the priority sector.
List of Districts with comparatively high PSL credit
List of Districts with comparatively low PSL credit
Indicative list of Permissible Activities under Food Processing Sector as shared by Ministry of Food Processing Industries (MoFPI)
Priority Sector achievement - Calculation of shortfall / excess Illustration: Tables No.1 and 2 below illustrate the method followed for computation of shortfall / excess in priority sector target achievement at the end of the financial year under the revised PSL guidelines. In the example given in Table - 1, the bank has overall shortfall of ₹2063 crore at the end of the financial year. In Table – 2, the bank has overall excess of ₹2293 crore at the end of the financial year. The Adjustments due to weightage on incremental credit in identified districts as per para 7, will be as per the data submitted by banks in the Automated Data Extraction Project (ADEPT). The same method will be followed for calculating the achievement of quarterly and yearly priority sector sub-targets. Note: The computation of priority sector targets/sub-targets achievement will be based on the ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposures, whichever is higher, as at the corresponding date of the preceding year. LIST OF CIRCULARS CONSOLIDATED
|
RBI/FIDD/2020-21/72 September 04, 2020 The Chairman / Managing Director/ Madam/Dear Sir, Master Directions – Priority Sector Lending (PSL) – Targets and Classification. The Priority Sector Lending (PSL) guidelines issued by Reserve Bank of India were last reviewed for Commercial Banks in April 2015 and for UCBs in May 2018 respectively. With an objective to harmonise various instructions issued to Commercial Banks, SFBs, RRBs, UCBs and LABs; align these guidelines with emerging national priorities and bring sharper focus on inclusive development, it was decided to comprehensively review the PSL guidelines. The revised guidelines also aim to encourage and support environment friendly lending policies to help achieve Sustainable Development Goals (SDGs). This review also took into account the recommendations made by the ‘Expert Committee on Micro, Small and Medium Enterprises (Chairman: Shri U.K. Sinha) and the ‘Internal Working Group to Review Agriculture Credit’ (Chairman: Shri M. K. Jain) apart from discussions with all stakeholders. Further, these Master Directions encompass the revised guidelines on PSL for all Commercial banks, RRBs, SFBs, UCBs and LABs and, accordingly, supersede the earlier Master Directions on PSL issued separately for Scheduled Commercial Banks, RRBs, SFBs and guidelines issued for UCBs, respectively. The list of circulars consolidated in these Master Directions is indicated in the Appendix. The Master Directions have been placed on the RBI website www.rbi.org.in. Yours faithfully, (Sonali Sen Gupta) INDEX Master Directions- Reserve Bank of India (Priority Sector Lending – In exercise of the powers conferred by Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949, the Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified. CHAPTER – I 1. Short Title and Commencement 1.1 These Directions shall be called the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2020. 1.2 These Directions shall come into effect on the day they are placed on the official website of the Reserve Bank of India. The provisions of these Directions shall apply to every Commercial Bank [including Regional Rural Bank (RRB), Small Finance Bank (SFB), Local Area Bank] and Primary (Urban) Co-operative Bank (UCB) other than Salary Earners’ Bank. 3. Definitions/ Clarifications 3.1 In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below:
3.2 All other expressions, unless defined herein, shall have the same meaning as has been assigned to them under the Banking Regulation Act, 1949 or the Reserve Bank of India Act, 1934 or any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be. 3.3 Banks must ensure that loans extended under priority sector are for approved purposes and the end use is continuously monitored. The banks should put in place proper internal controls and systems in this regard. CHAPTER – II 4. The categories under priority sector are as follows: The details of eligible activities under the above categories are specified in Chapter III. 5. Targets /Sub-targets for Priority sector 5.1 The targets and sub-targets set under priority sector lending, to be computed on the basis of the ANBC/ CEOBE as applicable as on the corresponding date of the preceding year, are as under:
5.2 The targets for lending to SMFs and for Weaker Sections shall be revised upwards from FY 2021-22 onwards as follows:
5.3 All domestic banks (other than UCBs) and foreign banks with more than 20 branches are directed to ensure that the overall lending to Non-Corporate Farmers (NCFs) does not fall below the system-wide average of the last three years’ achievement which will be separately notified every year. The applicable target for lending to the non-corporate farmers for FY 2021-22 will be 12.73% of ANBC or CEOBE whichever is higher. All efforts should be made by banks to reach the level of 13.5 percent of ANBC (erstwhile target for direct lending to agriculture sector). 6. Computation of Adjusted Net Bank Credit (ANBC) 6.1 For the purpose of priority sector lending, ANBC denotes the outstanding Bank Credit in India [As prescribed in item No.VI of Form ‘A’ under Section 42 (2) of the RBI Act, 1934] and computed as follows:
6.2 For the purpose of calculation of CEOBE, banks may be guided by the Master Circular on Exposure Norms issued by Department of Regulation, RBI vide DBR.No.Dir.BC.12/13.03.00/ 2015-16 dated July 1, 2015 and as updated from time to time. UCBs may be guided by the relevant provisions of the Master Circular dated July 1, 2015 on ‘Prudential Norms on Capital Adequacy - UCBs’ issued by Reserve Bank of India. 6.3 SFBs may be further guided by Para 6.5 (ii to vii) of the Operating Guidelines for Small Finance Banks issued by Department of Regulation (RBI/2016-17/81 DBR.NBD. No.26/16.13.218/2016-17 dated October 06, 2016), pertaining to treatment of grandfathered loans, for computation of ANBC. 6.4 While calculating Net Bank Credit as above, if banks subtract prudential write off at Corporate/Head Office level, it must be ensured that the credit to priority sector and all other sub-sectors so written off should also be subtracted category wise from priority sector and sub-target achievement. Wherever, investments or any other items which are treated as eligible for classification under priority sector target/sub-target achievement, the same should also form part of Adjusted Net Bank Credit. 6.5 All the banks have to adhere to the respective licencing guidelines and operating guidelines issued by the Department of Regulation, RBI and updated from time to time 7. Adjustments for weights in PSL Achievement To address regional disparities in the flow of priority sector credit at the district level, it has been decided to rank districts on the basis of per capita credit flow to priority sector and build an incentive framework for districts with comparatively lower flow of credit and a dis-incentive framework for districts with comparatively higher flow of priority sector credit. Accordingly, from FY 2021-22 onwards, a higher weight (125%) would be assigned to the incremental priority sector credit in the identified districts where the credit flow is comparatively lower (per capita PSL less than ₹6000), and a lower weight (90%) would be assigned for incremental priority sector credit in the identified districts where the credit flow is comparatively higher (per capita PSL greater than ₹25,000). The list of both categories of districts is given in Annex IA & IB. This list will be valid for a period up to FY 2023-24 and will be reviewed thereafter. The districts other than those mentioned in Annex IA and IB will continue to have existing weightage of 100%. The banks should continue to report the actual outstanding amount in QPSA returns as hitherto. Adjustments for weights to incremental PSL credit will be done by RBI, based on reporting of district wise credit flow to FIDD, CO through the ADEPT database. RRBs, UCBs, LABs and foreign banks (including WoS) would be exempted from adjustments of weights in PSL achievement due to their currently limited area of operation/catering to a niche segment. CHAPTER – III The lending to agriculture sector will include Farm Credit (Agriculture and Allied Activities), lending for Agriculture Infrastructure and Ancillary Activities. 8.1 Farm Credit - Individual farmers Loans to individual farmers [including Self Help Groups (SHGs) or Joint Liability Groups (JLGs) i.e. groups of individual farmers, provided banks maintain disaggregated data of such loans] and Proprietorship firms of farmers, directly engaged in Agriculture and Allied Activities, viz. dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture. This will include:
8.2 Farm Credit - Corporate farmers, Farmer Producer Organisations (FPOs)/(FPC) Companies of Individual Farmers, Partnership firms and Co-operatives of farmers engaged in Agriculture and Allied Activities (a) Loans for the following activities will be subject to an aggregate limit of ₹2 crore per borrowing entity:
(b) Loans up to ₹75 lakh against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months against NWRs/eNWRs and up to ₹50 lakh against warehouse receipts other than NWRs/eNWRs. (c) Loans up to ₹5 crore per borrowing entity to FPOs/FPCs undertaking farming with assured marketing of their produce at a pre-determined price. (d) UCBs are not permitted to lend to co-operatives of farmers. 8.3 Agriculture Infrastructure Loans for agriculture infrastructure will be subject to an aggregate sanctioned limit of ₹100 crore per borrower from the banking system. List of activities is furnished in Annex II. 8.4 Ancillary Services 8.4.1 Following loans under ancillary services will be subject to limits prescribed as under:
8.4.2 Outstanding deposits under RIDF and other eligible funds with NABARD on account of priority sector shortfall. 8.4.3 The eligible activities under ancillary services and food processing is given in Annex II and Annex III, respectively. 8.5 Small and Marginal Farmers (SMFs) For the purpose of computation of achievement of the sub-target, Small and Marginal Farmers will include the following:
8.6 Lending by banks to NBFCs and MFIs for on-lending in agriculture
9. Micro, Small and Medium Enterprises (MSMEs) The definition of MSMEs will be as per Government of India (GoI), Gazette Notification S.O. 2119 (E) dated June 26, 2020 read with circular RBI/2020-2021/10 FIDD.MSME & NFS.BC.No.3/06.02.31/2020-21 read with FIDD.MSME & NFS. BC. No.4/06.02.31/2020-21 dated July 2, 2020, August 21, 2020 respectively on ‘Credit flow to Micro, Small and Medium Enterprises Sector’ and updated from time to time. Further, such MSMEs should be engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 or engaged in providing or rendering of any service or services. All bank loans to MSMEs conforming to the above guidelines qualify for classification under priority sector lending. 9.1 Factoring Transactions (not applicable to RRBs and UCBs)
9.2 Khadi and Village Industries Sector (KVI) All loans to units in the KVI sector will be eligible for classification under the sub-target of 7.5 percent prescribed for Micro Enterprises under priority sector. 9.3 Other Finance to MSMEs
10. Export Credit (not applicable to RRBs and LABs) Export credit under agriculture and MSME sectors are allowed to be classified as PSL in the respective categories viz. agriculture and MSME. Export Credit (other than in agriculture and MSME) will be allowed to be classified as priority sector as per the following table:
10.1 Export credit includes pre-shipment and post-shipment export credit (excluding off-balance sheet items) as defined in Master Circular on Rupee / Foreign Currency Export Credit and Customer Service to Exporters issued by Department of Regulation, RBI vide DBR No.DIR.BC.14/04.02.002/2015-16 dated July 1, 2015 and updated from time to time. Loans to individuals for educational purposes, including vocational courses, not exceeding ₹ 20 lakh will be considered as eligible for priority sector classification. Loans currently classified as priority sector will continue till maturity. 12.1 Bank loans to Housing sector as per limits prescribed below are eligible for priority sector classification:
12.2 Loans up to ₹10 lakh in metropolitan centres and up to ₹6 lakh in other centres for repairs to damaged dwelling units conforming to the overall cost of the dwelling unit as prescribed in para 12.1. 12.3 Bank loans to any governmental agency for construction of dwelling units or for slum clearance and rehabilitation of slum dwellers subject to dwelling units with carpet area of not more than 60 sq.m. 12.4 Bank loans for affordable housing projects using at least 50% of FAR/FSI for dwelling units with carpet area of not more than 60 sq.m. 12.5 Bank loans to HFCs (approved by NHB for their refinance) for on-lending, up to ₹20 lakh for individual borrowers, for purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to conditions specified in para 23 and 24. 12.6 Outstanding deposits with NHB on account of priority sector shortfall. Bank loans to social infrastructure sector as per limits prescribed below are eligible for priority sector classification 13.1. Bank loans up to a limit of ₹5 crore per borrower for setting up schools, drinking water facilities and sanitation facilities including construction/ refurbishment of household toilets and water improvements at household level, etc. and loans up to a limit of ₹10 crore per borrower for building health care facilities including under ‘Ayushman Bharat’ in Tier II to Tier VI centres. In case of UCBs, the above limits are applicable only in centres having a population of less than one lakh. 13.2. # Bank loans to MFIs extended for on-lending to individuals and also to members of SHGs/JLGs for water and sanitation facilities subject to the criteria laid down in paragraph 21 of these Master Directions. # not applicable to RRBs, UCBs and SFBs. Bank loans up to a limit of ₹30 crore to borrowers for purposes like solar based power generators, biomass-based power generators, wind mills, micro-hydel plants and for non-conventional energy based public utilities, viz., street lighting systems and remote village electrification etc., will be eligible for Priority Sector classification. For individual households, the loan limit will be ₹10 lakh per borrower. The following loans as per the prescribed limits are eligible for priority sector classification: 15.1. Loans provided directly by banks to individuals and individual members of SHG/JLG satisfying the criteria as prescribed in Master Direction on Regulatory Framework for Microfinance Loans Directions, dated March 14, 2022. 15.2. Loans not exceeding ₹2.00 lakh provided by banks to SHG/JLG for activities other than agriculture or MSME, viz., loans for meeting social needs, construction or repair of house, construction of toilets or any viable common activity started by SHGs. 15.3. Loans to distressed persons [other than distressed farmers indebted to non-institutional lenders] not exceeding ₹1.00 lakh per borrower to prepay their debt to non-institutional lenders. 15.4. Loans sanctioned to State Sponsored Organisations for Scheduled Castes/ Scheduled Tribes for the specific purpose of purchase and supply of inputs and/or the marketing of the outputs of the beneficiaries of these organisations. 15.5. Loans up to ₹50 crore to Start-ups, as per definition of Ministry of Commerce and Industry, Govt. of India that are engaged in activities other than Agriculture or MSME. 16.1 Priority sector loans to the following borrowers will be considered as lending under Weaker Sections category:
16.2 Overdraft availed by PMJDY account holders as per limits and conditions prescribed by Department of Financial Services, Ministry of Finance from time to time may be classified under Weaker Sections. 16.3 In States, where one of the minority communities notified is, in fact, in majority, item (xi) will cover only the other notified minorities. These States/ Union Territories are Punjab, Meghalaya, Mizoram, Nagaland, Lakshadweep and Jammu & Kashmir. CHAPTER IV 17. Investments by banks in securitised assets (not applicable to RRBs and UCBs) Investments by banks in ‘securitised assets’, representing loans to various categories of priority sector, except 'others' category, are eligible for classification under respective categories of priority sector depending on the underlying assets provided:
18. Transfer of Assets through Direct Assignment /Outright purchase (not applicable to RRBs and UCBs) Assignment/outright purchase of pool of assets by banks representing loans under various categories of priority sector, except the ‘others’ category, will be eligible for classification under respective categories of priority sector provided:
19. Inter Bank Participation Certificates (IBPCs) (not applicable to UCBs)
20. Priority Sector Lending Certificates (PSLCs) The outstanding PSLCs bought by banks will be eligible for classification under respective categories of priority sector provided the underlying assets originated by banks are eligible to be classified as priority sector advances and fulfil the Reserve Bank of India guidelines on Priority Sector Lending Certificates issued vide Circular FIDD.CO.Plan.BC.23/04.09.001/2015-16 dated April 7, 2016. SFBs may further be guided by the terms and conditions specified in Para 1.9 of DBR circular No. DBR.NBD.26/16.13.218/2016-17 dated October 6, 2016 on credit risk transfer and portfolio sales/purchases. 21. Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for on-lending (not applicable to RRBs, UCBs, SFBs and LABs) 21.1 Banks other than SFBs are allowed to extend credit to registered NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised SRO for the sector, for on-lending to individuals and also to members of SHGs / JLGs. 21.2 With effect from May 5, 2021, SFBs are allowed to extend fresh credit to registered NBFC-MFIs and other MFIs (Societies, Trusts, etc.) which are members of RBI recognised ‘Self-Regulatory Organisation’ of the sector, and which have a ‘gross loan portfolio’ (GLP) of up to ₹500 crore as on March 31 of the previous year, for the purpose of on-lending to individuals. In case the GLP of the NBFC-MFIs/other MFIs exceeds the stipulated limit at a later date, all priority sector loans created prior to exceeding the GLP limit will continue to be classified by the SFBs as PSL till repayment/maturity, whichever is earlier. Bank credit as above will be allowed up to an overall limit of 10 percent of an individual bank’s total priority sector lending. These limits shall be computed by averaging across four quarters of the financial year, to determine adherence to the prescribed cap. 21.3 Loans disbursed by banks under para 21.1 and 21.2 above are eligible for categorisation as priority sector advance under respective categories viz., Agriculture, MSME, Social Infrastructure and Others, provided the MFIs adhere to the conditions prescribed in Chapter II (xx) and Chapter VIII of Master Directions DNBR PD.007 and Chapter II (xx) and Chapter IX of Master Directions DNBR PD.008/03.10.119/2016-17 dated September 1, 2016, as updated from time to time. 22. Bank loans to NBFCs for on-lending (not applicable to RRBs, UCBs, SFBs and LABs) Bank credit to registered NBFCs (other than MFIs) for on-lending will be eligible for classification as priority sector under respective categories subject to the following conditions:
23. Bank loans to HFCs for on-lending (not applicable to RRBs, SFBs and LABs) Bank credit to Housing Finance Companies (HFCs), approved by NHB for their refinance, for on-lending for the purpose of purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to an aggregate loan limit of ₹20 lakh per borrower. Banks should maintain necessary borrower-wise details of the underlying portfolio. Bank credit to NBFCs (including HFCs) for on-lending as applicable in para 22 and 23 above, will be allowed up to an overall limit of five percent of individual bank’s total priority sector lending. Banks shall compute the eligible portfolio under on-lending mechanism by averaging across four quarters, to determine adherence to the prescribed cap. 25. Co-lending by Banks and NBFCs to priority sector (not applicable to RRBs, UCBs, SFBs and LABs) All Scheduled Commercial Banks (excluding SFBs, RRBs, UCBs and LABs) are permitted to co-lend with all registered Non-Banking Financial Companies (including Housing Finance Companies) for lending to the priority sector. Detailed guidelines, in this regard, have been issued vide our circular FIDD.CO.Plan.BC.No.8/04.09.01/2020-21 dated November 5, 2020. For the sake of business continuity and to ensure uninterrupted flow of credit to the priority sector, banks may continue existing arrangement as per earlier guidelines on co-origination, issued vide our circular No. FIDD.CO.Plan.BC/08/04.09.01/2018-19 dated September 21, 2018, till the Board approved co-lending policy is put in place by them.
27. Monitoring of Priority Sector Lending targets To ensure continuous flow of credit to priority sector, the compliance of banks will be monitored on ‘quarterly’ basis. The data on priority sector advances is required to be furnished by banks to FIDD, Central Office at quarterly and annual intervals as per the reporting format (quarterly and annual). In respect of RRBs, the data on priority sector advances, in the above format, must be furnished to NABARD at quarterly and annual intervals. In respect of UCBs, the data on priority sector advances in the reporting formats ‘Statement I’ and ‘Statement II (Part A to D)’ shall be furnished at quarterly and annual intervals, to the Regional Office of DoS, RBI. 28. Non-achievement of Priority Sector targets
29. Common guidelines for priority sector loans Banks should comply with the following common guidelines for all categories of advances under the priority sector.
List of Districts with comparatively high PSL credit
List of Districts with comparatively low PSL credit
Indicative list of Permissible Activities under Food Processing Sector as shared by Ministry of Food Processing Industries (MoFPI)
Priority Sector achievement - Calculation of shortfall / excess Illustration: Tables No.1 and 2 below illustrate the method followed for computation of shortfall / excess in priority sector target achievement at the end of the financial year under the revised PSL guidelines. In the example given in Table - 1, the bank has overall shortfall of ₹2063 crore at the end of the financial year. In Table – 2, the bank has overall excess of ₹2293 crore at the end of the financial year. The Adjustments due to weightage on incremental credit in identified districts as per para 7, will be as per the data submitted by banks in the Automated Data Extraction Project (ADEPT). The same method will be followed for calculating the achievement of quarterly and yearly priority sector sub-targets. Note: The computation of priority sector targets/sub-targets achievement will be based on the ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposures, whichever is higher, as at the corresponding date of the preceding year. LIST OF CIRCULARS CONSOLIDATED
|
RBI/FIDD/2020-21/72 September 04, 2020 The Chairman / Managing Director/ Madam/Dear Sir, Master Directions – Priority Sector Lending (PSL) – Targets and Classification. The Priority Sector Lending (PSL) guidelines issued by Reserve Bank of India were last reviewed for Commercial Banks in April 2015 and for UCBs in May 2018 respectively. With an objective to harmonise various instructions issued to Commercial Banks, SFBs, RRBs, UCBs and LABs; align these guidelines with emerging national priorities and bring sharper focus on inclusive development, it was decided to comprehensively review the PSL guidelines. The revised guidelines also aim to encourage and support environment friendly lending policies to help achieve Sustainable Development Goals (SDGs). This review also took into account the recommendations made by the ‘Expert Committee on Micro, Small and Medium Enterprises (Chairman: Shri U.K. Sinha) and the ‘Internal Working Group to Review Agriculture Credit’ (Chairman: Shri M. K. Jain) apart from discussions with all stakeholders. Further, these Master Directions encompass the revised guidelines on PSL for all Commercial banks, RRBs, SFBs, UCBs and LABs and, accordingly, supersede the earlier Master Directions on PSL issued separately for Scheduled Commercial Banks, RRBs, SFBs and guidelines issued for UCBs, respectively. The list of circulars consolidated in these Master Directions is indicated in the Appendix. The Master Directions have been placed on the RBI website www.rbi.org.in. Yours faithfully, (Sonali Sen Gupta) INDEX Master Directions- Reserve Bank of India (Priority Sector Lending – In exercise of the powers conferred by Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949, the Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified. CHAPTER – I 1. Short Title and Commencement 1.1 These Directions shall be called the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2020. 1.2 These Directions shall come into effect on the day they are placed on the official website of the Reserve Bank of India. The provisions of these Directions shall apply to every Commercial Bank [including Regional Rural Bank (RRB), Small Finance Bank (SFB), Local Area Bank] and Primary (Urban) Co-operative Bank (UCB) other than Salary Earners’ Bank licensed to operate in India by the Reserve Bank of India. 3. Definitions/ Clarifications 3.1 In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below:
3.2 All other expressions, unless defined herein, shall have the same meaning as has been assigned to them under the Banking Regulation Act, 1949 or the Reserve Bank of India Act, 1934 or any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be. 3.3 Banks must ensure that loans extended under priority sector are for approved purposes and the end use is continuously monitored. The banks should put in place proper internal controls and systems in this regard. CHAPTER – II 4. The categories under priority sector are as follows: The details of eligible activities under the above categories are specified in Chapter III. 5. Targets /Sub-targets for Priority sector 5.1 The targets and sub-targets set under priority sector lending, to be computed on the basis of the ANBC/ CEOBE as applicable as on the corresponding date of the preceding year, are as under:
5.2 The targets for lending to SMFs and for Weaker Sections shall be revised upwards from FY 2021-22 onwards as follows:
5.3 All domestic banks (other than UCBs) and foreign banks with more than 20 branches are directed to ensure that the overall lending to Non-Corporate Farmers (NCFs) does not fall below the system-wide average of the last three years’ achievement which will be separately notified every year. The applicable target for lending to the non-corporate farmers for FY 2021-22 will be 12.73% of ANBC or CEOBE whichever is higher. All efforts should be made by banks to reach the level of 13.5 percent of ANBC (erstwhile target for direct lending to agriculture sector). 6. Computation of Adjusted Net Bank Credit (ANBC) 6.1 For the purpose of priority sector lending, ANBC denotes the outstanding Bank Credit in India [As prescribed in item No.VI of Form ‘A’ under Section 42 (2) of the RBI Act, 1934] and computed as follows:
6.2 For the purpose of calculation of CEOBE, banks may be guided by the Master Circular on Exposure Norms issued by Department of Regulation, RBI vide DBR.No.Dir.BC.12/13.03.00/ 2015-16 dated July 1, 2015 and as updated from time to time. UCBs may be guided by the relevant provisions of the Master Circular dated July 1, 2015 on ‘Prudential Norms on Capital Adequacy - UCBs’ issued by Reserve Bank of India. 6.3 SFBs may be further guided by Para 6.5 (ii to vii) of the Operating Guidelines for Small Finance Banks issued by Department of Regulation (RBI/2016-17/81 DBR.NBD. No.26/16.13.218/2016-17 dated October 06, 2016), pertaining to treatment of grandfathered loans, for computation of ANBC. 6.4 While calculating Net Bank Credit as above, if banks subtract prudential write off at Corporate/Head Office level, it must be ensured that the credit to priority sector and all other sub-sectors so written off should also be subtracted category wise from priority sector and sub-target achievement. Wherever, investments or any other items which are treated as eligible for classification under priority sector target/sub-target achievement, the same should also form part of Adjusted Net Bank Credit. 6.5 All the banks have to adhere to the respective licencing guidelines and operating guidelines issued by the Department of Regulation, RBI and updated from time to time 7. Adjustments for weights in PSL Achievement To address regional disparities in the flow of priority sector credit at the district level, it has been decided to rank districts on the basis of per capita credit flow to priority sector and build an incentive framework for districts with comparatively lower flow of credit and a dis-incentive framework for districts with comparatively higher flow of priority sector credit. Accordingly, from FY 2021-22 onwards, a higher weight (125%) would be assigned to the incremental priority sector credit in the identified districts where the credit flow is comparatively lower (per capita PSL less than ₹6000), and a lower weight (90%) would be assigned for incremental priority sector credit in the identified districts where the credit flow is comparatively higher (per capita PSL greater than ₹25,000). The list of both categories of districts is given in Annex IA & IB. This list will be valid for a period up to FY 2023-24 and will be reviewed thereafter. The districts other than those mentioned in Annex IA and IB will continue to have existing weightage of 100%. The banks should continue to report the actual outstanding amount in QPSA returns as hitherto. Adjustments for weights to incremental PSL credit will be done by RBI, based on reporting of district wise credit flow to FIDD, CO through the ADEPT database. RRBs, UCBs, LABs and foreign banks (including WoS) would be exempted from adjustments of weights in PSL achievement due to their currently limited area of operation/catering to a niche segment. CHAPTER – III The lending to agriculture sector will include Farm Credit (Agriculture and Allied Activities), lending for Agriculture Infrastructure and Ancillary Activities. 8.1 Farm Credit - Individual farmers Loans to individual farmers [including Self Help Groups (SHGs) or Joint Liability Groups (JLGs) i.e. groups of individual farmers, provided banks maintain disaggregated data of such loans] and Proprietorship firms of farmers, directly engaged in Agriculture and Allied Activities, viz. dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture. This will include:
8.2 Farm Credit - Corporate farmers, Farmer Producer Organisations (FPOs)/(FPC) Companies of Individual Farmers, Partnership firms and Co-operatives of farmers engaged in Agriculture and Allied Activities (a) Loans for the following activities will be subject to an aggregate limit of ₹2 crore per borrowing entity:
(b) Loans up to ₹75 lakh against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months against NWRs/eNWRs and up to ₹50 lakh against warehouse receipts other than NWRs/eNWRs. (c) Loans up to ₹5 crore per borrowing entity to FPOs/FPCs undertaking farming with assured marketing of their produce at a pre-determined price. (d) UCBs are not permitted to lend to co-operatives of farmers. 8.3 Agriculture Infrastructure Loans for agriculture infrastructure will be subject to an aggregate sanctioned limit of ₹100 crore per borrower from the banking system. List of activities is furnished in Annex II. 8.4 Ancillary Services 8.4.1 Following loans under ancillary services will be subject to limits prescribed as under:
8.4.2 Outstanding deposits under RIDF and other eligible funds with NABARD on account of priority sector shortfall. 8.4.3 The eligible activities under ancillary services and food processing is given in Annex II and Annex III, respectively. 8.5 Small and Marginal Farmers (SMFs) For the purpose of computation of achievement of the sub-target, Small and Marginal Farmers will include the following:
8.6 Lending by banks to NBFCs and MFIs for on-lending in agriculture
9. Micro, Small and Medium Enterprises (MSMEs) The definition of MSMEs will be as per Government of India (GoI), Gazette Notification S.O. 2119 (E) dated June 26, 2020 read with circular RBI/2020-2021/10 FIDD.MSME & NFS.BC.No.3/06.02.31/2020-21 read with FIDD.MSME & NFS. BC. No.4/06.02.31/2020-21 dated July 2, 2020, August 21, 2020 respectively on ‘Credit flow to Micro, Small and Medium Enterprises Sector’ and updated from time to time. Further, such MSMEs should be engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 or engaged in providing or rendering of any service or services. All bank loans to MSMEs conforming to the above guidelines qualify for classification under priority sector lending. 9.1 Factoring Transactions (not applicable to RRBs and UCBs)
9.2 Khadi and Village Industries Sector (KVI) All loans to units in the KVI sector will be eligible for classification under the sub-target of 7.5 percent prescribed for Micro Enterprises under priority sector. 9.3 Other Finance to MSMEs
10. Export Credit (not applicable to RRBs and LABs) Export credit under agriculture and MSME sectors are allowed to be classified as PSL in the respective categories viz. agriculture and MSME. Export Credit (other than in agriculture and MSME) will be allowed to be classified as priority sector as per the following table:
10.1 Export credit includes pre-shipment and post-shipment export credit (excluding off-balance sheet items) as defined in Master Circular on Rupee / Foreign Currency Export Credit and Customer Service to Exporters issued by Department of Regulation, RBI vide DBR No.DIR.BC.14/04.02.002/2015-16 dated July 1, 2015 and updated from time to time. Loans to individuals for educational purposes, including vocational courses, not exceeding ₹ 20 lakh will be considered as eligible for priority sector classification. Loans currently classified as priority sector will continue till maturity. 12.1 Bank loans to Housing sector as per limits prescribed below are eligible for priority sector classification:
12.2 Loans up to ₹10 lakh in metropolitan centres and up to ₹6 lakh in other centres for repairs to damaged dwelling units conforming to the overall cost of the dwelling unit as prescribed in para 12.1. 12.3 Bank loans to any governmental agency for construction of dwelling units or for slum clearance and rehabilitation of slum dwellers subject to dwelling units with carpet area of not more than 60 sq.m. 12.4 Bank loans for affordable housing projects using at least 50% of FAR/FSI for dwelling units with carpet area of not more than 60 sq.m. 12.5 Bank loans to HFCs (approved by NHB for their refinance) for on-lending, up to ₹20 lakh for individual borrowers, for purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to conditions specified in para 23 and 24. 12.6 Outstanding deposits with NHB on account of priority sector shortfall. Bank loans to social infrastructure sector as per limits prescribed below are eligible for priority sector classification 13.1. Bank loans up to a limit of ₹5 crore per borrower for setting up schools, drinking water facilities and sanitation facilities including construction/ refurbishment of household toilets and water improvements at household level, etc. and loans up to a limit of ₹10 crore per borrower for building health care facilities including under ‘Ayushman Bharat’ in Tier II to Tier VI centres. In case of UCBs, the above limits are applicable only in centres having a population of less than one lakh. 13.2. # Bank loans to MFIs extended for on-lending to individuals and also to members of SHGs/JLGs for water and sanitation facilities subject to the criteria laid down in paragraph 21 of these Master Directions. # not applicable to RRBs, UCBs and SFBs. Bank loans up to a limit of ₹30 crore to borrowers for purposes like solar based power generators, biomass-based power generators, wind mills, micro-hydel plants and for non-conventional energy based public utilities, viz., street lighting systems and remote village electrification etc., will be eligible for Priority Sector classification. For individual households, the loan limit will be ₹10 lakh per borrower. The following loans as per the prescribed limits are eligible for priority sector classification: 15.1. Loans not exceeding ₹1.00 lakh per borrower provided directly by banks to individuals and individual members of SHG/JLG, provided the individual borrower’s household annual income in rural areas does not exceed ₹1.00 lakh and for non-rural areas it does not exceed ₹1.60 lakh, and loans not exceeding ₹2.00 lakh provided directly by banks to SHG/JLG for activities other than agriculture or MSME, viz., loans for meeting social needs, construction or repair of house, construction of toilets or any viable common activity started by the SHGs. 15.2. Loans to distressed persons [other than distressed farmers indebted to non-institutional lenders] not exceeding ₹1.00 lakh per borrower to prepay their debt to non-institutional lenders. 15.3. Loans sanctioned to State Sponsored Organisations for Scheduled Castes/ Scheduled Tribes for the specific purpose of purchase and supply of inputs and/or the marketing of the outputs of the beneficiaries of these organisations. 15.4. Loans up to ₹50 crore to Start-ups, as per definition of Ministry of Commerce and Industry, Govt. of India that are engaged in activities other than Agriculture or MSME. 16.1 Priority sector loans to the following borrowers will be considered as lending under Weaker Sections category:
16.2 Overdraft availed by PMJDY account holders as per limits and conditions prescribed by Department of Financial Services, Ministry of Finance from time to time may be classified under Weaker Sections. 16.3 In States, where one of the minority communities notified is, in fact, in majority, item (xi) will cover only the other notified minorities. These States/ Union Territories are Punjab, Meghalaya, Mizoram, Nagaland, Lakshadweep and Jammu & Kashmir. CHAPTER IV 17. Investments by banks in securitised assets (not applicable to RRBs and UCBs) Investments by banks in ‘securitised assets’, representing loans to various categories of priority sector, except 'others' category, are eligible for classification under respective categories of priority sector depending on the underlying assets provided:
18. Transfer of Assets through Direct Assignment /Outright purchase (not applicable to RRBs and UCBs) Assignment/outright purchase of pool of assets by banks representing loans under various categories of priority sector, except the ‘others’ category, will be eligible for classification under respective categories of priority sector provided:
19. Inter Bank Participation Certificates (IBPCs) (not applicable to UCBs)
20. Priority Sector Lending Certificates (PSLCs) The outstanding PSLCs bought by banks will be eligible for classification under respective categories of priority sector provided the underlying assets originated by banks are eligible to be classified as priority sector advances and fulfil the Reserve Bank of India guidelines on Priority Sector Lending Certificates issued vide Circular FIDD.CO.Plan.BC.23/04.09.001/2015-16 dated April 7, 2016. SFBs may further be guided by the terms and conditions specified in Para 1.9 of DBR circular No. DBR.NBD.26/16.13.218/2016-17 dated October 6, 2016 on credit risk transfer and portfolio sales/purchases. 21. Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for on-lending (not applicable to RRBs, UCBs, SFBs and LABs) 21.1 Banks other than SFBs are allowed to extend credit to registered NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised SRO for the sector, for on-lending to individuals and also to members of SHGs / JLGs. 21.2 With effect from May 5, 2021, SFBs are allowed to extend fresh credit to registered NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised ‘Self-Regulatory Organisation’ of the sector, and which have a ‘gross loan portfolio’ of up to ₹500 crore as on 31 March 2021, for the purpose of on-lending to individuals. Bank credit as above will be permitted up to 10% of the bank’s total priority sector portfolio as on 31 March, 2021. The above dispensation shall be valid up to March 31, 2022. However, loans thus disbursed will continue to be classified under Priority Sector till the date of repayment/maturity whichever is earlier. 21.3 Loans disbursed by banks under para 21.1 and 21.2 above are eligible for categorisation as priority sector advance under respective categories viz., Agriculture, MSME, Social Infrastructure and Others, provided the MFIs adhere to the conditions prescribed in Chapter II (xx) and Chapter VIII of Master Directions DNBR PD.007 and Chapter II (xx) and Chapter IX of Master Directions DNBR PD.008/03.10.119/2016-17 dated September 1, 2016, as updated from time to time. 22. Bank loans to NBFCs for on-lending (not applicable to RRBs, UCBs, SFBs and LABs) Bank credit to registered NBFCs (other than MFIs) for on-lending will be eligible for classification as priority sector under respective categories subject to the following conditions:
The above dispensation shall be valid upto March 2022. However, loans disbursed under the on-lending model will continue to be classified under Priority Sector till the date of repayment/maturity. 23. Bank loans to HFCs for on-lending (not applicable to RRBs, SFBs and LABs) Bank credit to Housing Finance Companies (HFCs), approved by NHB for their refinance, for on-lending for the purpose of purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to an aggregate loan limit of ₹20 lakh per borrower. Banks should maintain necessary borrower-wise details of the underlying portfolio. Bank credit to NBFCs (including HFCs) for on-lending as applicable in para 22 and 23 above, will be allowed up to an overall limit of five percent of individual bank’s total priority sector lending. Banks shall compute the eligible portfolio under on-lending mechanism by averaging across four quarters, to determine adherence to the prescribed cap. 25. Co-lending by Banks and NBFCs to priority sector (not applicable to RRBs, UCBs, SFBs and LABs) All Scheduled Commercial Banks (excluding SFBs, RRBs, UCBs and LABs) are permitted to co-lend with all registered Non-Banking Financial Companies (including Housing Finance Companies) for lending to the priority sector. Detailed guidelines, in this regard, have been issued vide our circular FIDD.CO.Plan.BC.No.8/04.09.01/2020-21 dated November 5, 2020. For the sake of business continuity and to ensure uninterrupted flow of credit to the priority sector, banks may continue existing arrangement as per earlier guidelines on co-origination, issued vide our circular No. FIDD.CO.Plan.BC/08/04.09.01/2018-19 dated September 21, 2018, till the Board approved co-lending policy is put in place by them.
27. Monitoring of Priority Sector Lending targets To ensure continuous flow of credit to priority sector, the compliance of banks will be monitored on ‘quarterly’ basis. The data on priority sector advances is required to be furnished by banks to FIDD, Central Office at quarterly and annual intervals as per the reporting format (quarterly and annual). In respect of RRBs, the data on priority sector advances, in the above format, must be furnished to NABARD at quarterly and annual intervals. In respect of UCBs, the data on priority sector advances in the reporting formats ‘Statement I’ and ‘Statement II (Part A to D)’ shall be furnished at quarterly and annual intervals, to the Regional Office of DoS, RBI. 28. Non-achievement of Priority Sector targets
29. Common guidelines for priority sector loans Banks should comply with the following common guidelines for all categories of advances under the priority sector.
List of Districts with comparatively high PSL credit
List of Districts with comparatively low PSL credit
Indicative list of Permissible Activities under Food Processing Sector as shared by Ministry of Food Processing Industries (MoFPI)
Priority Sector achievement - Calculation of shortfall / excess Illustration: Tables No.1 and 2 below illustrate the method followed for computation of shortfall / excess in priority sector target achievement at the end of the financial year under the revised PSL guidelines. In the example given in Table - 1, the bank has overall shortfall of ₹2063 crore at the end of the financial year. In Table – 2, the bank has overall excess of ₹2293 crore at the end of the financial year. The Adjustments due to weightage on incremental credit in identified districts as per para 7, will be as per the data submitted by banks in the Automated Data Extraction Project (ADEPT). The same method will be followed for calculating the achievement of quarterly and yearly priority sector sub-targets. Note: The computation of priority sector targets/sub-targets achievement will be based on the ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposures, whichever is higher, as at the corresponding date of the preceding year. LIST OF CIRCULARS CONSOLIDATED
|
RBI/FIDD/2020-21/72 September 04, 2020 The Chairman / Managing Director/ Madam/Dear Sir, Master Directions – Priority Sector Lending (PSL) – Targets and Classification. The Priority Sector Lending (PSL) guidelines issued by Reserve Bank of India were last reviewed for Commercial Banks in April 2015 and for UCBs in May 2018 respectively. With an objective to harmonise various instructions issued to Commercial Banks, SFBs, RRBs, UCBs and LABs; align these guidelines with emerging national priorities and bring sharper focus on inclusive development, it was decided to comprehensively review the PSL guidelines. The revised guidelines also aim to encourage and support environment friendly lending policies to help achieve Sustainable Development Goals (SDGs). This review also took into account the recommendations made by the ‘Expert Committee on Micro, Small and Medium Enterprises (Chairman: Shri U.K. Sinha) and the ‘Internal Working Group to Review Agriculture Credit’ (Chairman: Shri M. K. Jain) apart from discussions with all stakeholders. Further, these Master Directions encompass the revised guidelines on PSL for all Commercial banks, RRBs, SFBs, UCBs and LABs and, accordingly, supersede the earlier Master Directions on PSL issued separately for Scheduled Commercial Banks, RRBs, SFBs and guidelines issued for UCBs, respectively. The list of circulars consolidated in these Master Directions is indicated in the Appendix. The Master Directions have been placed on the RBI website www.rbi.org.in. Yours faithfully, (Sonali Sen Gupta) INDEX Master Directions- Reserve Bank of India (Priority Sector Lending – In exercise of the powers conferred by Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949, the Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified. CHAPTER – I 1. Short Title and Commencement 1.1 These Directions shall be called the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2020. 1.2 These Directions shall come into effect on the day they are placed on the official website of the Reserve Bank of India. The provisions of these Directions shall apply to every Commercial Bank [including Regional Rural Bank (RRB), Small Finance Bank (SFB), Local Area Bank] and Primary (Urban) Co-operative Bank (UCB) other than Salary Earners’ Bank licensed to operate in India by the Reserve Bank of India. 3. Definitions/ Clarifications 3.1 In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below:
3.2 All other expressions, unless defined herein, shall have the same meaning as has been assigned to them under the Banking Regulation Act, 1949 or the Reserve Bank of India Act, 1934 or any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be. 3.3 Banks must ensure that loans extended under priority sector are for approved purposes and the end use is continuously monitored. The banks should put in place proper internal controls and systems in this regard. CHAPTER – II 4. The categories under priority sector are as follows: The details of eligible activities under the above categories are specified in Chapter III. 5. Targets /Sub-targets for Priority sector 5.1 The targets and sub-targets set under priority sector lending, to be computed on the basis of the ANBC/ CEOBE as applicable as on the corresponding date of the preceding year, are as under:
5.2 The targets for lending to SMFs and for Weaker Sections shall be revised upwards from FY 2021-22 onwards as follows:
5.3 All domestic banks (other than UCBs) and foreign banks with more than 20 branches are directed to ensure that the overall lending to Non-Corporate Farmers (NCFs) does not fall below the system-wide average of the last three years’ achievement which will be separately notified every year. The applicable target for lending to the non-corporate farmers for FY 2020-21 will be 12.14% of ANBC or CEOBE whichever is higher. All efforts should be made by banks to reach the level of 13.5 percent of ANBC (erstwhile target for direct lending to agriculture sector). 6. Computation of Adjusted Net Bank Credit (ANBC) 6.1 For the purpose of priority sector lending, ANBC denotes the outstanding Bank Credit in India [As prescribed in item No.VI of Form ‘A’ under Section 42 (2) of the RBI Act, 1934] and computed as follows:
6.2 For the purpose of calculation of CEOBE, banks may be guided by the Master Circular on Exposure Norms issued by Department of Regulation, RBI vide DBR.No.Dir.BC.12/13.03.00/ 2015-16 dated July 1, 2015 and as updated from time to time. UCBs may be guided by the relevant provisions of the Master Circular dated July 1, 2015 on ‘Prudential Norms on Capital Adequacy - UCBs’ issued by Reserve Bank of India. 6.3 SFBs may be further guided by Para 6.5 (ii to vii) of the Operating Guidelines for Small Finance Banks issued by Department of Regulation (RBI/2016-17/81 DBR.NBD. No.26/16.13.218/2016-17 dated October 06, 2016), pertaining to treatment of grandfathered loans, for computation of ANBC. 6.4 While calculating Net Bank Credit as above, if banks subtract prudential write off at Corporate/Head Office level, it must be ensured that the credit to priority sector and all other sub-sectors so written off should also be subtracted category wise from priority sector and sub-target achievement. Wherever, investments or any other items which are treated as eligible for classification under priority sector target/sub-target achievement, the same should also form part of Adjusted Net Bank Credit. 6.5 All the banks have to adhere to the respective licencing guidelines and operating guidelines issued by the Department of Regulation, RBI and updated from time to time 7. Adjustments for weights in PSL Achievement To address regional disparities in the flow of priority sector credit at the district level, it has been decided to rank districts on the basis of per capita credit flow to priority sector and build an incentive framework for districts with comparatively lower flow of credit and a dis-incentive framework for districts with comparatively higher flow of priority sector credit. Accordingly, from FY 2021-22 onwards, a higher weight (125%) would be assigned to the incremental priority sector credit in the identified districts where the credit flow is comparatively lower (per capita PSL less than ₹6000), and a lower weight (90%) would be assigned for incremental priority sector credit in the identified districts where the credit flow is comparatively higher (per capita PSL greater than ₹25,000). The list of both categories of districts is given in Annex IA & IB. This list will be valid for a period up to FY 2023-24 and will be reviewed thereafter. The districts other than those mentioned in Annex IA and IB will continue to have existing weightage of 100%. The banks should continue to report the actual outstanding amount in QPSA returns as hitherto. Adjustments for weights to incremental PSL credit will be done by RBI, based on reporting of district wise credit flow to FIDD, CO through the ADEPT database. RRBs, UCBs, LABs and foreign banks (including WoS) would be exempted from adjustments of weights in PSL achievement due to their currently limited area of operation/catering to a niche segment. CHAPTER – III The lending to agriculture sector will include Farm Credit (Agriculture and Allied Activities), lending for Agriculture Infrastructure and Ancillary Activities. 8.1 Farm Credit - Individual farmers Loans to individual farmers [including Self Help Groups (SHGs) or Joint Liability Groups (JLGs) i.e. groups of individual farmers, provided banks maintain disaggregated data of such loans] and Proprietorship firms of farmers, directly engaged in Agriculture and Allied Activities, viz. dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture. This will include:
8.2 Farm Credit - Corporate farmers, Farmer Producer Organisations (FPOs)/(FPC) Companies of Individual Farmers, Partnership firms and Co-operatives of farmers engaged in Agriculture and Allied Activities (a) Loans for the following activities will be subject to an aggregate limit of ₹2 crore per borrowing entity:
(b) Loans up to ₹75 lakh against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months against NWRs/eNWRs and up to ₹50 lakh against warehouse receipts other than NWRs/eNWRs. (c) Loans up to ₹5 crore per borrowing entity to FPOs/FPCs undertaking farming with assured marketing of their produce at a pre-determined price. (d) UCBs are not permitted to lend to co-operatives of farmers. 8.3 Agriculture Infrastructure Loans for agriculture infrastructure will be subject to an aggregate sanctioned limit of ₹100 crore per borrower from the banking system. List of activities is furnished in Annex II. 8.4 Ancillary Services 8.4.1 Following loans under ancillary services will be subject to limits prescribed as under:
8.4.2 Outstanding deposits under RIDF and other eligible funds with NABARD on account of priority sector shortfall. 8.4.3 The eligible activities under ancillary services and food processing is given in Annex II and Annex III, respectively. 8.5 Small and Marginal Farmers (SMFs) For the purpose of computation of achievement of the sub-target, Small and Marginal Farmers will include the following:
8.6 Lending by banks to NBFCs and MFIs for on-lending in agriculture
9. Micro, Small and Medium Enterprises (MSMEs) The definition of MSMEs will be as per Government of India (GoI), Gazette Notification S.O. 2119 (E) dated June 26, 2020 read with circular RBI/2020-2021/10 FIDD.MSME & NFS.BC.No.3/06.02.31/2020-21 read with FIDD.MSME & NFS. BC. No.4/06.02.31/2020-21 dated July 2, 2020, August 21, 2020 respectively on ‘Credit flow to Micro, Small and Medium Enterprises Sector’ and updated from time to time. Further, such MSMEs should be engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 or engaged in providing or rendering of any service or services. All bank loans to MSMEs conforming to the above guidelines qualify for classification under priority sector lending. 9.1 Factoring Transactions (not applicable to RRBs and UCBs)
9.2 Khadi and Village Industries Sector (KVI) All loans to units in the KVI sector will be eligible for classification under the sub-target of 7.5 percent prescribed for Micro Enterprises under priority sector. 9.3 Other Finance to MSMEs
10. Export Credit (not applicable to RRBs and LABs) Export credit under agriculture and MSME sectors are allowed to be classified as PSL in the respective categories viz. agriculture and MSME. Export Credit (other than in agriculture and MSME) will be allowed to be classified as priority sector as per the following table:
10.1 Export credit includes pre-shipment and post-shipment export credit (excluding off-balance sheet items) as defined in Master Circular on Rupee / Foreign Currency Export Credit and Customer Service to Exporters issued by Department of Regulation, RBI vide DBR No.DIR.BC.14/04.02.002/2015-16 dated July 1, 2015 and updated from time to time. Loans to individuals for educational purposes, including vocational courses, not exceeding ₹ 20 lakh will be considered as eligible for priority sector classification. Loans currently classified as priority sector will continue till maturity. 12.1 Bank loans to Housing sector as per limits prescribed below are eligible for priority sector classification:
12.2 Loans up to ₹10 lakh in metropolitan centres and up to ₹6 lakh in other centres for repairs to damaged dwelling units conforming to the overall cost of the dwelling unit as prescribed in para 12.1. 12.3 Bank loans to any governmental agency for construction of dwelling units or for slum clearance and rehabilitation of slum dwellers subject to dwelling units with carpet area of not more than 60 sq.m. 12.4 Bank loans for affordable housing projects using at least 50% of FAR/FSI for dwelling units with carpet area of not more than 60 sq.m. 12.5 Bank loans to HFCs (approved by NHB for their refinance) for on-lending, up to ₹20 lakh for individual borrowers, for purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to conditions specified in para 23 and 24. 12.6 Outstanding deposits with NHB on account of priority sector shortfall. Bank loans to social infrastructure sector as per limits prescribed below are eligible for priority sector classification 13.1. Bank loans up to a limit of ₹5 crore per borrower for setting up schools, drinking water facilities and sanitation facilities including construction/ refurbishment of household toilets and water improvements at household level, etc. and loans up to a limit of ₹10 crore per borrower for building health care facilities including under ‘Ayushman Bharat’ in Tier II to Tier VI centres. In case of UCBs, the above limits are applicable only in centres having a population of less than one lakh. 13.2. # Bank loans to MFIs extended for on-lending to individuals and also to members of SHGs/JLGs for water and sanitation facilities subject to the criteria laid down in paragraph 21 of these Master Directions. # not applicable to RRBs, UCBs and SFBs. Bank loans up to a limit of ₹30 crore to borrowers for purposes like solar based power generators, biomass-based power generators, wind mills, micro-hydel plants and for non-conventional energy based public utilities, viz., street lighting systems and remote village electrification etc., will be eligible for Priority Sector classification. For individual households, the loan limit will be ₹10 lakh per borrower. The following loans as per the prescribed limits are eligible for priority sector classification: 15.1. Loans not exceeding ₹1.00 lakh per borrower provided directly by banks to individuals and individual members of SHG/JLG, provided the individual borrower’s household annual income in rural areas does not exceed ₹1.00 lakh and for non-rural areas it does not exceed ₹1.60 lakh, and loans not exceeding ₹2.00 lakh provided directly by banks to SHG/JLG for activities other than agriculture or MSME, viz., loans for meeting social needs, construction or repair of house, construction of toilets or any viable common activity started by the SHGs. 15.2. Loans to distressed persons [other than distressed farmers indebted to non-institutional lenders] not exceeding ₹1.00 lakh per borrower to prepay their debt to non-institutional lenders. 15.3. Loans sanctioned to State Sponsored Organisations for Scheduled Castes/ Scheduled Tribes for the specific purpose of purchase and supply of inputs and/or the marketing of the outputs of the beneficiaries of these organisations. 15.4. Loans up to ₹50 crore to Start-ups, as per definition of Ministry of Commerce and Industry, Govt. of India that are engaged in activities other than Agriculture or MSME. 16.1 Priority sector loans to the following borrowers will be considered as lending under Weaker Sections category:
16.2 Overdraft availed by PMJDY account holders as per limits and conditions prescribed by Department of Financial Services, Ministry of Finance from time to time may be classified under Weaker Sections. 16.3 In States, where one of the minority communities notified is, in fact, in majority, item (xi) will cover only the other notified minorities. These States/ Union Territories are Punjab, Meghalaya, Mizoram, Nagaland, Lakshadweep and Jammu & Kashmir. CHAPTER IV 17. Investments by banks in securitised assets (not applicable to RRBs and UCBs) Investments by banks in ‘securitised assets’, representing loans to various categories of priority sector, except 'others' category, are eligible for classification under respective categories of priority sector depending on the underlying assets provided:
18. Transfer of Assets through Direct Assignment /Outright purchase (not applicable to RRBs and UCBs) Assignment/outright purchase of pool of assets by banks representing loans under various categories of priority sector, except the ‘others’ category, will be eligible for classification under respective categories of priority sector provided:
19. Inter Bank Participation Certificates (IBPCs) (not applicable to UCBs)
20. Priority Sector Lending Certificates (PSLCs) The outstanding PSLCs bought by banks will be eligible for classification under respective categories of priority sector provided the underlying assets originated by banks are eligible to be classified as priority sector advances and fulfil the Reserve Bank of India guidelines on Priority Sector Lending Certificates issued vide Circular FIDD.CO.Plan.BC.23/04.09.001/2015-16 dated April 7, 2016. SFBs may further be guided by the terms and conditions specified in Para 1.9 of DBR circular No. DBR.NBD.26/16.13.218/2016-17 dated October 6, 2016 on credit risk transfer and portfolio sales/purchases. 21. Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for on-lending (not applicable to RRBs, UCBs, SFBs and LABs) 21.1 Banks other than SFBs are allowed to extend credit to registered NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised SRO for the sector, for on-lending to individuals and also to members of SHGs / JLGs. 21.2 With effect from May 5, 2021, SFBs are allowed to extend fresh credit to registered NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised ‘Self-Regulatory Organisation’ of the sector, and which have a ‘gross loan portfolio’ of up to ₹500 crore as on 31 March 2021, for the purpose of on-lending to individuals. Bank credit as above will be permitted up to 10% of the bank’s total priority sector portfolio as on 31 March, 2021. The above dispensation shall be valid up to March 31, 2022. However, loans thus disbursed will continue to be classified under Priority Sector till the date of repayment/maturity whichever is earlier. 21.3 Loans disbursed by banks under para 21.1 and 21.2 above are eligible for categorisation as priority sector advance under respective categories viz., Agriculture, MSME, Social Infrastructure and Others, provided the MFIs adhere to the conditions prescribed in Chapter II (xx) and Chapter VIII of Master Directions DNBR PD.007 and Chapter II (xx) and Chapter IX of Master Directions DNBR PD.008/03.10.119/2016-17 dated September 1, 2016, as updated from time to time. 22. Bank loans to NBFCs for on-lending (not applicable to RRBs, UCBs, SFBs and LABs) Bank credit to registered NBFCs (other than MFIs) for on-lending will be eligible for classification as priority sector under respective categories subject to the following conditions:
The above dispensation shall be valid upto September 2021. However, loans disbursed under the on-lending model will continue to be classified under Priority Sector till the date of repayment/maturity. 23. Bank loans to HFCs for on-lending (not applicable to RRBs, SFBs and LABs) Bank credit to Housing Finance Companies (HFCs), approved by NHB for their refinance, for on-lending for the purpose of purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to an aggregate loan limit of ₹20 lakh per borrower. Banks should maintain necessary borrower-wise details of the underlying portfolio. Bank credit to NBFCs (including HFCs) for on-lending as applicable in para 22 and 23 above, will be allowed up to an overall limit of five percent of individual bank’s total priority sector lending. Banks shall compute the eligible portfolio under on-lending mechanism by averaging across four quarters, to determine adherence to the prescribed cap. 25. Co-lending by Banks and NBFCs to priority sector (not applicable to RRBs, UCBs, SFBs and LABs) All Scheduled Commercial Banks (excluding SFBs, RRBs, UCBs and LABs) are permitted to co-lend with all registered Non-Banking Financial Companies (including Housing Finance Companies) for lending to the priority sector. Detailed guidelines, in this regard, have been issued vide our circular FIDD.CO.Plan.BC.No.8/04.09.01/2020-21 dated November 5, 2020. For the sake of business continuity and to ensure uninterrupted flow of credit to the priority sector, banks may continue existing arrangement as per earlier guidelines on co-origination, issued vide our circular No. FIDD.CO.Plan.BC/08/04.09.01/2018-19 dated September 21, 2018, till the Board approved co-lending policy is put in place by them.
27. Monitoring of Priority Sector Lending targets To ensure continuous flow of credit to priority sector, the compliance of banks will be monitored on ‘quarterly’ basis. The data on priority sector advances is required to be furnished by banks to FIDD, Central Office at quarterly and annual intervals as per the reporting format (quarterly and annual). In respect of RRBs, the data on priority sector advances, in the above format, must be furnished to NABARD at quarterly and annual intervals. In respect of UCBs, the data on priority sector advances in the reporting formats ‘Statement I’ and ‘Statement II (Part A to D)’ shall be furnished at quarterly and annual intervals, to the Regional Office of DoS, RBI. 28. Non-achievement of Priority Sector targets
29. Common guidelines for priority sector loans Banks should comply with the following common guidelines for all categories of advances under the priority sector.
List of Districts with comparatively high PSL credit
List of Districts with comparatively low PSL credit
Indicative list of Permissible Activities under Food Processing Sector as shared by Ministry of Food Processing Industries (MoFPI)
Priority Sector achievement - Calculation of shortfall / excess Illustration: Tables No.1 and 2 below illustrate the method followed for computation of shortfall / excess in priority sector target achievement at the end of the financial year under the revised PSL guidelines. In the example given in Table - 1, the bank has overall shortfall of ₹2063 crore at the end of the financial year. In Table – 2, the bank has overall excess of ₹2293 crore at the end of the financial year. The Adjustments due to weightage on incremental credit in identified districts as per para 7, will be as per the data submitted by banks in the Automated Data Extraction Project (ADEPT). The same method will be followed for calculating the achievement of quarterly and yearly priority sector sub-targets. Note: The computation of priority sector targets/sub-targets achievement will be based on the ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposures, whichever is higher, as at the corresponding date of the preceding year. LIST OF CIRCULARS CONSOLIDATED
|
RBI/FIDD/2020-21/72 September 04, 2020 The Chairman / Managing Director/ Madam/Dear Sir, Master Directions – Priority Sector Lending (PSL) – Targets and Classification. The Priority Sector Lending (PSL) guidelines issued by Reserve Bank of India were last reviewed for Commercial Banks in April 2015 and for UCBs in May 2018 respectively. With an objective to harmonise various instructions issued to Commercial Banks, SFBs, RRBs, UCBs and LABs; align these guidelines with emerging national priorities and bring sharper focus on inclusive development, it was decided to comprehensively review the PSL guidelines. The revised guidelines also aim to encourage and support environment friendly lending policies to help achieve Sustainable Development Goals (SDGs). This review also took into account the recommendations made by the ‘Expert Committee on Micro, Small and Medium Enterprises (Chairman: Shri U.K. Sinha) and the ‘Internal Working Group to Review Agriculture Credit’ (Chairman: Shri M. K. Jain) apart from discussions with all stakeholders. Further, these Master Directions encompass the revised guidelines on PSL for all Commercial banks, RRBs, SFBs, UCBs and LABs and, accordingly, supersede the earlier Master Directions on PSL issued separately for Scheduled Commercial Banks, RRBs, SFBs and guidelines issued for UCBs, respectively. The list of circulars consolidated in these Master Directions is indicated in the Appendix. The Master Directions have been placed on the RBI website www.rbi.org.in. Yours faithfully, (Sonali Sen Gupta) INDEX Master Directions- Reserve Bank of India (Priority Sector Lending – In exercise of the powers conferred by Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949, the Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified. CHAPTER – I 1. Short Title and Commencement 1.1 These Directions shall be called the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2020. 1.2 These Directions shall come into effect on the day they are placed on the official website of the Reserve Bank of India. The provisions of these Directions shall apply to every Commercial Bank [including Regional Rural Bank (RRB), Small Finance Bank (SFB), Local Area Bank] and Primary (Urban) Co-operative Bank (UCB) other than Salary Earners’ Bank licensed to operate in India by the Reserve Bank of India. 3. Definitions/ Clarifications 3.1 In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below:
3.2 All other expressions, unless defined herein, shall have the same meaning as has been assigned to them under the Banking Regulation Act, 1949 or the Reserve Bank of India Act, 1934 or any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be. 3.3 Banks must ensure that loans extended under priority sector are for approved purposes and the end use is continuously monitored. The banks should put in place proper internal controls and systems in this regard. CHAPTER – II 4. The categories under priority sector are as follows: The details of eligible activities under the above categories are specified in Chapter III. 5. Targets /Sub-targets for Priority sector 5.1 The targets and sub-targets set under priority sector lending, to be computed on the basis of the ANBC/ CEOBE as applicable as on the corresponding date of the preceding year, are as under:
5.2 The targets for lending to SMFs and for Weaker Sections shall be revised upwards from FY 2021-22 onwards as follows:
5.3 All domestic banks (other than UCBs) and foreign banks with more than 20 branches are directed to ensure that the overall lending to Non-Corporate Farmers (NCFs) does not fall below the system-wide average of the last three years’ achievement which will be separately notified every year. The applicable target for lending to the non-corporate farmers for FY 2020-21 will be 12.14% of ANBC or CEOBE whichever is higher. All efforts should be made by banks to reach the level of 13.5 percent of ANBC (erstwhile target for direct lending to agriculture sector). 6. Computation of Adjusted Net Bank Credit (ANBC) 6.1 For the purpose of priority sector lending, ANBC denotes the outstanding Bank Credit in India [As prescribed in item No.VI of Form ‘A’ under Section 42 (2) of the RBI Act, 1934] and computed as follows:
6.2 For the purpose of calculation of CEOBE, banks may be guided by the Master Circular on Exposure Norms issued by Department of Regulation, RBI vide DBR.No.Dir.BC.12/13.03.00/ 2015-16 dated July 1, 2015 and as updated from time to time. UCBs may be guided by the relevant provisions of the Master Circular dated July 1, 2015 on ‘Prudential Norms on Capital Adequacy - UCBs’ issued by Reserve Bank of India. 6.3 SFBs may be further guided by Para 6.5 (ii to vii) of the Operating Guidelines for Small Finance Banks issued by Department of Regulation (RBI/2016-17/81 DBR.NBD. No.26/16.13.218/2016-17 dated October 06, 2016), pertaining to treatment of grandfathered loans, for computation of ANBC. 6.4 While calculating Net Bank Credit as above, if banks subtract prudential write off at Corporate/Head Office level, it must be ensured that the credit to priority sector and all other sub-sectors so written off should also be subtracted category wise from priority sector and sub-target achievement. Wherever, investments or any other items which are treated as eligible for classification under priority sector target/sub-target achievement, the same should also form part of Adjusted Net Bank Credit. 6.5 All the banks have to adhere to the respective licencing guidelines and operating guidelines issued by the Department of Regulation, RBI and updated from time to time 7. Adjustments for weights in PSL Achievement To address regional disparities in the flow of priority sector credit at the district level, it has been decided to rank districts on the basis of per capita credit flow to priority sector and build an incentive framework for districts with comparatively lower flow of credit and a dis-incentive framework for districts with comparatively higher flow of priority sector credit. Accordingly, from FY 2021-22 onwards, a higher weight (125%) would be assigned to the incremental priority sector credit in the identified districts where the credit flow is comparatively lower (per capita PSL less than ₹6000), and a lower weight (90%) would be assigned for incremental priority sector credit in the identified districts where the credit flow is comparatively higher (per capita PSL greater than ₹25,000). The list of both categories of districts is given in Annex IA & IB. This list will be valid for a period up to FY 2023-24 and will be reviewed thereafter. The districts other than those mentioned in Annex IA and IB will continue to have existing weightage of 100%. The banks should continue to report the actual outstanding amount in QPSA returns as hitherto. Adjustments for weights to incremental PSL credit will be done by RBI, based on reporting of district wise credit flow to FIDD, CO through the ADEPT database. RRBs, UCBs, LABs and foreign banks (including WoS) would be exempted from adjustments of weights in PSL achievement due to their currently limited area of operation/catering to a niche segment. CHAPTER – III The lending to agriculture sector will include Farm Credit (Agriculture and Allied Activities), lending for Agriculture Infrastructure and Ancillary Activities. 8.1 Farm Credit - Individual farmers Loans to individual farmers [including Self Help Groups (SHGs) or Joint Liability Groups (JLGs) i.e. groups of individual farmers, provided banks maintain disaggregated data of such loans] and Proprietorship firms of farmers, directly engaged in Agriculture and Allied Activities, viz. dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture. This will include:
8.2 Farm Credit - Corporate farmers, Farmer Producer Organisations (FPOs)/(FPC) Companies of Individual Farmers, Partnership firms and Co-operatives of farmers engaged in Agriculture and Allied Activities (a) Loans for the following activities will be subject to an aggregate limit of ₹2 crore per borrowing entity:
(b) Loans up to ₹75 lakh against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months against NWRs/eNWRs and up to ₹50 lakh against warehouse receipts other than NWRs/eNWRs. (c) Loans up to ₹5 crore per borrowing entity to FPOs/FPCs undertaking farming with assured marketing of their produce at a pre-determined price. (d) UCBs are not permitted to lend to co-operatives of farmers. 8.3 Agriculture Infrastructure Loans for agriculture infrastructure will be subject to an aggregate sanctioned limit of ₹100 crore per borrower from the banking system. List of activities is furnished in Annex II. 8.4 Ancillary Services 8.4.1 Following loans under ancillary services will be subject to limits prescribed as under:
8.4.2 Outstanding deposits under RIDF and other eligible funds with NABARD on account of priority sector shortfall. 8.4.3 The eligible activities under ancillary services and food processing is given in Annex II and Annex III, respectively. 8.5 Small and Marginal Farmers (SMFs) For the purpose of computation of achievement of the sub-target, Small and Marginal Farmers will include the following:
8.6 Lending by banks to NBFCs and MFIs for on-lending in agriculture
9. Micro, Small and Medium Enterprises (MSMEs) The definition of MSMEs will be as per Government of India (GoI), Gazette Notification S.O. 2119 (E) dated June 26, 2020 read with circular RBI/2020-2021/10 FIDD.MSME & NFS.BC.No.3/06.02.31/2020-21 read with FIDD.MSME & NFS. BC. No.4/06.02.31/2020-21 dated July 2, 2020, August 21, 2020 respectively on ‘Credit flow to Micro, Small and Medium Enterprises Sector’ and updated from time to time. Further, such MSMEs should be engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 or engaged in providing or rendering of any service or services. All bank loans to MSMEs conforming to the above guidelines qualify for classification under priority sector lending. 9.1 Factoring Transactions (not applicable to RRBs and UCBs)
9.2 Khadi and Village Industries Sector (KVI) All loans to units in the KVI sector will be eligible for classification under the sub-target of 7.5 percent prescribed for Micro Enterprises under priority sector. 9.3 Other Finance to MSMEs
10. Export Credit (not applicable to RRBs and LABs) Export credit under agriculture and MSME sectors are allowed to be classified as PSL in the respective categories viz. agriculture and MSME. Export Credit (other than in agriculture and MSME) will be allowed to be classified as priority sector as per the following table:
10.1 Export credit includes pre-shipment and post-shipment export credit (excluding off-balance sheet items) as defined in Master Circular on Rupee / Foreign Currency Export Credit and Customer Service to Exporters issued by Department of Regulation, RBI vide DBR No.DIR.BC.14/04.02.002/2015-16 dated July 1, 2015 and updated from time to time. Loans to individuals for educational purposes, including vocational courses, not exceeding ₹ 20 lakh will be considered as eligible for priority sector classification. Loans currently classified as priority sector will continue till maturity. 12.1 Bank loans to Housing sector as per limits prescribed below are eligible for priority sector classification:
12.2 Loans up to ₹10 lakh in metropolitan centres and up to ₹6 lakh in other centres for repairs to damaged dwelling units conforming to the overall cost of the dwelling unit as prescribed in para 12.1. 12.3 Bank loans to any governmental agency for construction of dwelling units or for slum clearance and rehabilitation of slum dwellers subject to dwelling units with carpet area of not more than 60 sq.m. 12.4 Bank loans for affordable housing projects using at least 50% of FAR/FSI for dwelling units with carpet area of not more than 60 sq.m. 12.5 Bank loans to HFCs (approved by NHB for their refinance) for on-lending, up to ₹20 lakh for individual borrowers, for purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to conditions specified in para 23 and 24. 12.6 Outstanding deposits with NHB on account of priority sector shortfall. Bank loans to social infrastructure sector as per limits prescribed below are eligible for priority sector classification 13.1. Bank loans up to a limit of ₹5 crore per borrower for setting up schools, drinking water facilities and sanitation facilities including construction/ refurbishment of household toilets and water improvements at household level, etc. and loans up to a limit of ₹10 crore per borrower for building health care facilities including under ‘Ayushman Bharat’ in Tier II to Tier VI centres. In case of UCBs, the above limits are applicable only in centres having a population of less than one lakh. 13.2. # Bank loans to MFIs extended for on-lending to individuals and also to members of SHGs/JLGs for water and sanitation facilities subject to the criteria laid down in paragraph 21 of these Master Directions. # not applicable to RRBs, UCBs and SFBs. Bank loans up to a limit of ₹30 crore to borrowers for purposes like solar based power generators, biomass-based power generators, wind mills, micro-hydel plants and for non-conventional energy based public utilities, viz., street lighting systems and remote village electrification etc., will be eligible for Priority Sector classification. For individual households, the loan limit will be ₹10 lakh per borrower. The following loans as per the prescribed limits are eligible for priority sector classification: 15.1. Loans not exceeding ₹1.00 lakh per borrower provided directly by banks to individuals and individual members of SHG/JLG, provided the individual borrower’s household annual income in rural areas does not exceed ₹1.00 lakh and for non-rural areas it does not exceed ₹1.60 lakh, and loans not exceeding ₹2.00 lakh provided directly by banks to SHG/JLG for activities other than agriculture or MSME, viz., loans for meeting social needs, construction or repair of house, construction of toilets or any viable common activity started by the SHGs. 15.2. Loans to distressed persons [other than distressed farmers indebted to non-institutional lenders] not exceeding ₹1.00 lakh per borrower to prepay their debt to non-institutional lenders. 15.3. Loans sanctioned to State Sponsored Organisations for Scheduled Castes/ Scheduled Tribes for the specific purpose of purchase and supply of inputs and/or the marketing of the outputs of the beneficiaries of these organisations. 15.4. Loans up to ₹50 crore to Start-ups, as per definition of Ministry of Commerce and Industry, Govt. of India that are engaged in activities other than Agriculture or MSME. 16.1 Priority sector loans to the following borrowers will be considered as lending under Weaker Sections category:
16.2 Overdraft availed by PMJDY account holders as per limits and conditions prescribed by Department of Financial Services, Ministry of Finance from time to time may be classified under Weaker Sections. 16.3 In States, where one of the minority communities notified is, in fact, in majority, item (xi) will cover only the other notified minorities. These States/ Union Territories are Punjab, Meghalaya, Mizoram, Nagaland, Lakshadweep and Jammu & Kashmir. CHAPTER IV 17. Investments by banks in securitised assets (not applicable to RRBs and UCBs) Investments by banks in ‘securitised assets’, representing loans to various categories of priority sector, except 'others' category, are eligible for classification under respective categories of priority sector depending on the underlying assets provided:
18. Transfer of Assets through Direct Assignment /Outright purchase (not applicable to RRBs and UCBs) Assignment/outright purchase of pool of assets by banks representing loans under various categories of priority sector, except the ‘others’ category, will be eligible for classification under respective categories of priority sector provided:
19. Inter Bank Participation Certificates (IBPCs) (not applicable to UCBs)
20. Priority Sector Lending Certificates (PSLCs) The outstanding PSLCs bought by banks will be eligible for classification under respective categories of priority sector provided the underlying assets originated by banks are eligible to be classified as priority sector advances and fulfil the Reserve Bank of India guidelines on Priority Sector Lending Certificates issued vide Circular FIDD.CO.Plan.BC.23/04.09.001/2015-16 dated April 7, 2016. SFBs may further be guided by the terms and conditions specified in Para 1.9 of DBR circular No. DBR.NBD.26/16.13.218/2016-17 dated October 6, 2016 on credit risk transfer and portfolio sales/purchases. 21. Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for on-lending (not applicable to RRBs, UCBs, SFBs and LABs) 21.1 Banks other than SFBs are allowed to extend credit to registered NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised SRO for the sector, for on-lending to individuals and also to members of SHGs / JLGs. 21.2 With effect from May 5, 2021, SFBs are allowed to extend fresh credit to registered NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised ‘Self-Regulatory Organisation’ of the sector, and which have a ‘gross loan portfolio’ of up to ₹500 crore as on 31 March 2021, for the purpose of on-lending to individuals. Bank credit as above will be permitted up to 10% of the bank’s total priority sector portfolio as on 31 March, 2021. The above dispensation shall be valid up to March 31, 2022. However, loans thus disbursed will continue to be classified under Priority Sector till the date of repayment/maturity whichever is earlier. 21.3 Loans disbursed by banks under para 21.1 and 21.2 above are eligible for categorisation as priority sector advance under respective categories viz., Agriculture, MSME, Social Infrastructure and Others, provided the MFIs adhere to the conditions prescribed in Chapter II (xx) and Chapter VIII of Master Directions DNBR PD.007 and Chapter II (xx) and Chapter IX of Master Directions DNBR PD.008/03.10.119/2016-17 dated September 1, 2016, as updated from time to time. 22. Bank loans to NBFCs for on-lending (not applicable to RRBs, UCBs, SFBs and LABs) Bank credit to registered NBFCs (other than MFIs) for on-lending will be eligible for classification as priority sector under respective categories subject to the following conditions:
The above dispensation shall be valid upto September 2021. However, loans disbursed under the on-lending model will continue to be classified under Priority Sector till the date of repayment/maturity. 23. Bank loans to HFCs for on-lending (not applicable to RRBs, SFBs and LABs) Bank credit to Housing Finance Companies (HFCs), approved by NHB for their refinance, for on-lending for the purpose of purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to an aggregate loan limit of ₹20 lakh per borrower. Banks should maintain necessary borrower-wise details of the underlying portfolio. Bank credit to NBFCs (including HFCs) for on-lending as applicable in para 22 and 23 above, will be allowed up to an overall limit of five percent of individual bank’s total priority sector lending. Banks shall compute the eligible portfolio under on-lending mechanism by averaging across four quarters, to determine adherence to the prescribed cap. 25. Co-lending by Banks and NBFCs to priority sector (not applicable to RRBs, UCBs, SFBs and LABs) All Scheduled Commercial Banks (excluding SFBs, RRBs, UCBs and LABs) are permitted to co-lend with all registered Non-Banking Financial Companies (including Housing Finance Companies) for lending to the priority sector. Detailed guidelines, in this regard, have been issued vide our circular FIDD.CO.Plan.BC.No.8/04.09.01/2020-21 dated November 5, 2020. For the sake of business continuity and to ensure uninterrupted flow of credit to the priority sector, banks may continue existing arrangement as per earlier guidelines on co-origination, issued vide our circular No. FIDD.CO.Plan.BC/08/04.09.01/2018-19 dated September 21, 2018, till the Board approved co-lending policy is put in place by them.
27. Monitoring of Priority Sector Lending targets To ensure continuous flow of credit to priority sector, the compliance of banks will be monitored on ‘quarterly’ basis. The data on priority sector advances is required to be furnished by banks to FIDD, Central Office at quarterly and annual intervals as per the reporting format (quarterly and annual). In respect of RRBs, the data on priority sector advances, in the above format, must be furnished to NABARD at quarterly and annual intervals. In respect of UCBs, the data on priority sector advances in the reporting formats ‘Statement I’ and ‘Statement II (Part A to D)’ shall be furnished at quarterly and annual intervals, to the Regional Office of DoS, RBI. 28. Non-achievement of Priority Sector targets
29. Common guidelines for priority sector loans Banks should comply with the following common guidelines for all categories of advances under the priority sector.
List of Districts with comparatively high PSL credit
List of Districts with comparatively low PSL credit
Indicative list of Permissible Activities under Food Processing Sector as shared by Ministry of Food Processing Industries (MoFPI)
Priority Sector achievement - Calculation of shortfall / excess Illustration: Tables No.1 and 2 below illustrate the method followed for computation of shortfall / excess in priority sector target achievement at the end of the financial year under the revised PSL guidelines. In the example given in Table - 1, the bank has overall shortfall of ₹2063 crore at the end of the financial year. In Table – 2, the bank has overall excess of ₹2293 crore at the end of the financial year. The Adjustments due to weightage on incremental credit in identified districts as per para 7, will be as per the data submitted by banks in the Automated Data Extraction Project (ADEPT). The same method will be followed for calculating the achievement of quarterly and yearly priority sector sub-targets. Note: The computation of priority sector targets/sub-targets achievement will be based on the ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposures, whichever is higher, as at the corresponding date of the preceding year. LIST OF CIRCULARS CONSOLIDATED
|
RBI/FIDD/2020-21/72 September 04, 2020 The Chairman / Managing Director/ Madam/Dear Sir, Master Directions – Priority Sector Lending (PSL) – Targets and Classification. The Priority Sector Lending (PSL) guidelines issued by Reserve Bank of India were last reviewed for Commercial Banks in April 2015 and for UCBs in May 2018 respectively. With an objective to harmonise various instructions issued to Commercial Banks, SFBs, RRBs, UCBs and LABs; align these guidelines with emerging national priorities and bring sharper focus on inclusive development, it was decided to comprehensively review the PSL guidelines. The revised guidelines also aim to encourage and support environment friendly lending policies to help achieve Sustainable Development Goals (SDGs). This review also took into account the recommendations made by the ‘Expert Committee on Micro, Small and Medium Enterprises (Chairman: Shri U.K. Sinha) and the ‘Internal Working Group to Review Agriculture Credit’ (Chairman: Shri M. K. Jain) apart from discussions with all stakeholders. Further, these Master Directions encompass the revised guidelines on PSL for all Commercial banks, RRBs, SFBs, UCBs and LABs and, accordingly, supersede the earlier Master Directions on PSL issued separately for Scheduled Commercial Banks, RRBs, SFBs and guidelines issued for UCBs, respectively. The list of circulars consolidated in these Master Directions is indicated in the Appendix. The Master Directions have been placed on the RBI website www.rbi.org.in. Yours faithfully, (Sonali Sen Gupta) INDEX Master Directions- Reserve Bank of India (Priority Sector Lending – In exercise of the powers conferred by Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949, the Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified. CHAPTER – I 1. Short Title and Commencement 1.1 These Directions shall be called the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2020. 1.2 These Directions shall come into effect on the day they are placed on the official website of the Reserve Bank of India. The provisions of these Directions shall apply to every Commercial Bank [including Regional Rural Bank (RRB), Small Finance Bank (SFB), Local Area Bank] and Primary (Urban) Co-operative Bank (UCB) other than Salary Earners’ Bank licensed to operate in India by the Reserve Bank of India. 3. Definitions/ Clarifications 3.1 In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below:
3.2 All other expressions, unless defined herein, shall have the same meaning as has been assigned to them under the Banking Regulation Act, 1949 or the Reserve Bank of India Act, 1934 or any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be. 3.3 Banks must ensure that loans extended under priority sector are for approved purposes and the end use is continuously monitored. The banks should put in place proper internal controls and systems in this regard. CHAPTER – II 4. The categories under priority sector are as follows: The details of eligible activities under the above categories are specified in Chapter III. 5. Targets /Sub-targets for Priority sector 5.1 The targets and sub-targets set under priority sector lending, to be computed on the basis of the ANBC/ CEOBE as applicable as on the corresponding date of the preceding year, are as under:
5.2 The targets for lending to SMFs and for Weaker Sections shall be revised upwards from FY 2021-22 onwards as follows:
5.3 All domestic banks (other than UCBs) and foreign banks with more than 20 branches are directed to ensure that the overall lending to Non-Corporate Farmers (NCFs) does not fall below the system-wide average of the last three years’ achievement which will be separately notified every year. The applicable target for lending to the non-corporate farmers for FY 2020-21 will be 12.14% of ANBC or CEOBE whichever is higher. All efforts should be made by banks to reach the level of 13.5 percent of ANBC (erstwhile target for direct lending to agriculture sector). 6. Computation of Adjusted Net Bank Credit (ANBC) 6.1 For the purpose of priority sector lending, ANBC denotes the outstanding Bank Credit in India [As prescribed in item No.VI of Form ‘A’ under Section 42 (2) of the RBI Act, 1934] and computed as follows:
6.2 For the purpose of calculation of CEOBE, banks may be guided by the Master Circular on Exposure Norms issued by Department of Regulation, RBI vide DBR.No.Dir.BC.12/13.03.00/ 2015-16 dated July 1, 2015 and as updated from time to time. UCBs may be guided by the relevant provisions of the Master Circular dated July 1, 2015 on ‘Prudential Norms on Capital Adequacy - UCBs’ issued by Reserve Bank of India. 6.3 SFBs may be further guided by Para 6.5 (ii to vii) of the Operating Guidelines for Small Finance Banks issued by Department of Regulation (RBI/2016-17/81 DBR.NBD. No.26/16.13.218/2016-17 dated October 06, 2016), pertaining to treatment of grandfathered loans, for computation of ANBC. 6.4 While calculating Net Bank Credit as above, if banks subtract prudential write off at Corporate/Head Office level, it must be ensured that the credit to priority sector and all other sub-sectors so written off should also be subtracted category wise from priority sector and sub-target achievement. Wherever, investments or any other items which are treated as eligible for classification under priority sector target/sub-target achievement, the same should also form part of Adjusted Net Bank Credit. 6.5 All the banks have to adhere to the respective licencing guidelines and operating guidelines issued by the Department of Regulation, RBI and updated from time to time 7. Adjustments for weights in PSL Achievement To address regional disparities in the flow of priority sector credit at the district level, it has been decided to rank districts on the basis of per capita credit flow to priority sector and build an incentive framework for districts with comparatively lower flow of credit and a dis-incentive framework for districts with comparatively higher flow of priority sector credit. Accordingly, from FY 2021-22 onwards, a higher weight (125%) would be assigned to the incremental priority sector credit in the identified districts where the credit flow is comparatively lower (per capita PSL less than ₹6000), and a lower weight (90%) would be assigned for incremental priority sector credit in the identified districts where the credit flow is comparatively higher (per capita PSL greater than ₹25,000). The list of both categories of districts is given in Annex IA & IB. This list will be valid for a period up to FY 2023-24 and will be reviewed thereafter. The districts other than those mentioned in Annex IA and IB will continue to have existing weightage of 100%. The banks should continue to report the actual outstanding amount in QPSA returns as hitherto. Adjustments for weights to incremental PSL credit will be done by RBI, based on reporting of district wise credit flow to FIDD, CO through the ADEPT database. RRBs, UCBs, LABs and foreign banks (including WoS) would be exempted from adjustments of weights in PSL achievement due to their currently limited area of operation/catering to a niche segment. CHAPTER – III The lending to agriculture sector will include Farm Credit (Agriculture and Allied Activities), lending for Agriculture Infrastructure and Ancillary Activities. 8.1 Farm Credit - Individual farmers Loans to individual farmers [including Self Help Groups (SHGs) or Joint Liability Groups (JLGs) i.e. groups of individual farmers, provided banks maintain disaggregated data of such loans] and Proprietorship firms of farmers, directly engaged in Agriculture and Allied Activities, viz. dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture. This will include:
8.2 Farm Credit - Corporate farmers, Farmer Producer Organisations (FPOs)/(FPC) Companies of Individual Farmers, Partnership firms and Co-operatives of farmers engaged in Agriculture and Allied Activities (a) Loans for the following activities will be subject to an aggregate limit of ₹2 crore per borrowing entity:
(b) Loans up to ₹75 lakh against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months against NWRs/eNWRs and up to ₹50 lakh against warehouse receipts other than NWRs/eNWRs. (c) Loans up to ₹5 crore per borrowing entity to FPOs/FPCs undertaking farming with assured marketing of their produce at a pre-determined price. (d) UCBs are not permitted to lend to co-operatives of farmers. 8.3 Agriculture Infrastructure Loans for agriculture infrastructure will be subject to an aggregate sanctioned limit of ₹100 crore per borrower from the banking system. List of activities is furnished in Annex II. 8.4 Ancillary Services 8.4.1 Following loans under ancillary services will be subject to limits prescribed as under:
8.4.2 Outstanding deposits under RIDF and other eligible funds with NABARD on account of priority sector shortfall. 8.4.3 The eligible activities under ancillary services and food and agro-processing is given in Annex II and Annex III, respectively. 8.5 Small and Marginal Farmers (SMFs) For the purpose of computation of achievement of the sub-target, Small and Marginal Farmers will include the following:
8.6 Lending by banks to NBFCs and MFIs for on-lending in agriculture
9. Micro, Small and Medium Enterprises (MSMEs) The definition of MSMEs will be as per Government of India (GoI), Gazette Notification S.O. 2119 (E) dated June 26, 2020 read with circular RBI/2020-2021/10 FIDD.MSME & NFS.BC.No.3/06.02.31/2020-21 read with FIDD.MSME & NFS. BC. No.4/06.02.31/2020-21 dated July 2, 2020, August 21, 2020 respectively on ‘Credit flow to Micro, Small and Medium Enterprises Sector’ and updated from time to time. Further, such MSMEs should be engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 or engaged in providing or rendering of any service or services. All bank loans to MSMEs conforming to the above guidelines qualify for classification under priority sector lending. 9.1 Factoring Transactions (not applicable to RRBs and UCBs)
9.2 Khadi and Village Industries Sector (KVI) All loans to units in the KVI sector will be eligible for classification under the sub-target of 7.5 percent prescribed for Micro Enterprises under priority sector. 9.3 Other Finance to MSMEs
10. Export Credit (not applicable to RRBs and LABs) Export credit under agriculture and MSME sectors are allowed to be classified as PSL in the respective categories viz. agriculture and MSME. Export Credit (other than in agriculture and MSME) will be allowed to be classified as priority sector as per the following table:
10.1 Export credit includes pre-shipment and post-shipment export credit (excluding off-balance sheet items) as defined in Master Circular on Rupee / Foreign Currency Export Credit and Customer Service to Exporters issued by Department of Regulation, RBI vide DBR No.DIR.BC.14/04.02.002/2015-16 dated July 1, 2015 and updated from time to time. Loans to individuals for educational purposes, including vocational courses, not exceeding ₹ 20 lakh will be considered as eligible for priority sector classification. Loans currently classified as priority sector will continue till maturity. 12.1 Bank loans to Housing sector as per limits prescribed below are eligible for priority sector classification:
12.2 Loans up to ₹10 lakh in metropolitan centres and up to ₹6 lakh in other centres for repairs to damaged dwelling units conforming to the overall cost of the dwelling unit as prescribed in para 12.1. 12.3 Bank loans to any governmental agency for construction of dwelling units or for slum clearance and rehabilitation of slum dwellers subject to dwelling units with carpet area of not more than 60 sq.m. 12.4 Bank loans for affordable housing projects using at least 50% of FAR/FSI for dwelling units with carpet area of not more than 60 sq.m. 12.5 Bank loans to HFCs (approved by NHB for their refinance) for on-lending, up to ₹20 lakh for individual borrowers, for purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to conditions specified in para 23 and 24. 12.6 Outstanding deposits with NHB on account of priority sector shortfall. Bank loans to social infrastructure sector as per limits prescribed below are eligible for priority sector classification 13.1. Bank loans up to a limit of ₹5 crore per borrower for setting up schools, drinking water facilities and sanitation facilities including construction/ refurbishment of household toilets and water improvements at household level, etc. and loans up to a limit of ₹10 crore per borrower for building health care facilities including under ‘Ayushman Bharat’ in Tier II to Tier VI centres. In case of UCBs, the above limits are applicable only in centres having a population of less than one lakh. 13.2. # Bank loans to MFIs extended for on-lending to individuals and also to members of SHGs/JLGs for water and sanitation facilities subject to the criteria laid down in paragraph 21 of these Master Directions. # not applicable to RRBs, UCBs and SFBs. Bank loans up to a limit of ₹30 crore to borrowers for purposes like solar based power generators, biomass-based power generators, wind mills, micro-hydel plants and for non-conventional energy based public utilities, viz., street lighting systems and remote village electrification etc., will be eligible for Priority Sector classification. For individual households, the loan limit will be ₹10 lakh per borrower. The following loans as per the prescribed limits are eligible for priority sector classification: 15.1. Loans not exceeding ₹1.00 lakh per borrower provided directly by banks to individuals and individual members of SHG/JLG, provided the individual borrower’s household annual income in rural areas does not exceed ₹1.00 lakh and for non-rural areas it does not exceed ₹1.60 lakh, and loans not exceeding ₹2.00 lakh provided directly by banks to SHG/JLG for activities other than agriculture or MSME, viz., loans for meeting social needs, construction or repair of house, construction of toilets or any viable common activity started by the SHGs. 15.2. Loans to distressed persons [other than distressed farmers indebted to non-institutional lenders] not exceeding ₹1.00 lakh per borrower to prepay their debt to non-institutional lenders. 15.3. Loans sanctioned to State Sponsored Organisations for Scheduled Castes/ Scheduled Tribes for the specific purpose of purchase and supply of inputs and/or the marketing of the outputs of the beneficiaries of these organisations. 15.4. Loans up to ₹50 crore to Start-ups, as per definition of Ministry of Commerce and Industry, Govt. of India that are engaged in activities other than Agriculture or MSME. 16.1 Priority sector loans to the following borrowers will be considered as lending under Weaker Sections category:
16.2 Overdraft availed by PMJDY account holders as per limits and conditions prescribed by Department of Financial Services, Ministry of Finance from time to time may be classified under Weaker Sections. 16.3 In States, where one of the minority communities notified is, in fact, in majority, item (xi) will cover only the other notified minorities. These States/ Union Territories are Punjab, Meghalaya, Mizoram, Nagaland, Lakshadweep and Jammu & Kashmir. CHAPTER IV 17. Investments by banks in securitised assets (not applicable to RRBs and UCBs) Investments by banks in ‘securitised assets’, representing loans to various categories of priority sector, except 'others' category, are eligible for classification under respective categories of priority sector depending on the underlying assets provided:
18. Transfer of Assets through Direct Assignment /Outright purchase (not applicable to RRBs and UCBs) Assignment/outright purchase of pool of assets by banks representing loans under various categories of priority sector, except the ‘others’ category, will be eligible for classification under respective categories of priority sector provided:
19. Inter Bank Participation Certificates (IBPCs) (not applicable to UCBs)
20. Priority Sector Lending Certificates (PSLCs) The outstanding PSLCs bought by banks will be eligible for classification under respective categories of priority sector provided the underlying assets originated by banks are eligible to be classified as priority sector advances and fulfil the Reserve Bank of India guidelines on Priority Sector Lending Certificates issued vide Circular FIDD.CO.Plan.BC.23/04.09.001/2015-16 dated April 7, 2016. SFBs may further be guided by the terms and conditions specified in Para 1.9 of DBR circular No. DBR.NBD.26/16.13.218/2016-17 dated October 6, 2016 on credit risk transfer and portfolio sales/purchases. 21. Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for on-lending (not applicable to RRBs, UCBs, SFBs and LABs) Bank credit extended to registered NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised SRO for the sector, for on-lending to individuals and also to members of SHGs / JLGs will be eligible for categorisation as priority sector advance under respective categories viz., Agriculture, MSME, Social Infrastructure and Others, provided the MFIs adhere to the conditions prescribed in Chapter II (xx) and Chapter VIII of Master Directions DNBR PD.007 and Chapter II (xx) and Chapter IX of Master Directions DNBR PD.008/03.10.119/2016-17 dated September 1, 2016 and as updated from time to time. 22. Bank loans to NBFCs for on-lending (not applicable to RRBs, UCBs, SFBs and LABs) Bank credit to registered NBFCs (other than MFIs) for on-lending will be eligible for classification as priority sector under respective categories subject to the following conditions:
The above dispensation shall be valid upto September 2021. However, loans disbursed under the on-lending model will continue to be classified under Priority Sector till the date of repayment/maturity. 23. Bank loans to HFCs for on-lending (not applicable to RRBs, SFBs and LABs) Bank credit to Housing Finance Companies (HFCs), approved by NHB for their refinance, for on-lending for the purpose of purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to an aggregate loan limit of ₹20 lakh per borrower. Banks should maintain necessary borrower-wise details of the underlying portfolio. Bank credit to NBFCs (including HFCs) for on-lending as applicable in para 22 and 23 above, will be allowed up to an overall limit of five percent of individual bank’s total priority sector lending. Banks shall compute the eligible portfolio under on-lending mechanism by averaging across four quarters, to determine adherence to the prescribed cap. 25. Co-lending by Banks and NBFCs to priority sector (not applicable to RRBs, UCBs, SFBs and LABs) All Scheduled Commercial Banks (excluding SFBs, RRBs, UCBs and LABs) are permitted to co-lend with all registered Non-Banking Financial Companies (including Housing Finance Companies) for lending to the priority sector. Detailed guidelines, in this regard, have been issued vide our circular FIDD.CO.Plan.BC.No.8/04.09.01/2020-21 dated November 5, 2020. For the sake of business continuity and to ensure uninterrupted flow of credit to the priority sector, banks may continue existing arrangement as per earlier guidelines on co-origination, issued vide our circular No. FIDD.CO.Plan.BC/08/04.09.01/2018-19 dated September 21, 2018, till the Board approved co-lending policy is put in place by them. 26. Monitoring of Priority Sector Lending targets To ensure continuous flow of credit to priority sector, the compliance of banks will be monitored on ‘quarterly’ basis. The data on priority sector advances is required to be furnished by banks to FIDD, Central Office at quarterly and annual intervals as per the reporting format (quarterly and annual). In respect of RRBs, the data on priority sector advances, in the above format, must be furnished to NABARD at quarterly and annual intervals. In respect of UCBs, the data on priority sector advances in the reporting formats ‘Statement I’ and ‘Statement II (Part A to D)’ shall be furnished at quarterly and annual intervals, to the Regional Office of DoS, RBI. 27. Non-achievement of Priority Sector targets
28. Common guidelines for priority sector loans Banks should comply with the following common guidelines for all categories of advances under the priority sector.
List of Districts with comparatively high PSL credit
List of Districts with comparatively low PSL credit
Indicative list of Permissible Activities under Food Processing Sector as shared by Ministry of Food Processing Industries (MoFPI)
Priority Sector achievement - Calculation of shortfall / excess Illustration: Tables No.1 and 2 below illustrate the method followed for computation of shortfall / excess in priority sector target achievement at the end of the financial year under the revised PSL guidelines. In the example given in Table - 1, the bank has overall shortfall of ₹2063 crore at the end of the financial year. In Table – 2, the bank has overall excess of ₹2293 crore at the end of the financial year. The Adjustments due to weightage on incremental credit in identified districts as per para 7, will be as per the data submitted by banks in the Automated Data Extraction Project (ADEPT). The same method will be followed for calculating the achievement of quarterly and yearly priority sector sub-targets. Note: The computation of priority sector targets/sub-targets achievement will be based on the ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposures, whichever is higher, as at the corresponding date of the preceding year. LIST OF CIRCULARS CONSOLIDATED
|
RBI/FIDD/2020-21/72 September 04, 2020 The Chairman / Managing Director/ Madam/Dear Sir, Master Directions – Priority Sector Lending (PSL) – Targets and Classification. The Priority Sector Lending (PSL) guidelines issued by Reserve Bank of India were last reviewed for Commercial Banks in April 2015 and for UCBs in May 2018 respectively. With an objective to harmonise various instructions issued to Commercial Banks, SFBs, RRBs, UCBs and LABs; align these guidelines with emerging national priorities and bring sharper focus on inclusive development, it was decided to comprehensively review the PSL guidelines. The revised guidelines also aim to encourage and support environment friendly lending policies to help achieve Sustainable Development Goals (SDGs). This review also took into account the recommendations made by the ‘Expert Committee on Micro, Small and Medium Enterprises (Chairman: Shri U.K. Sinha) and the ‘Internal Working Group to Review Agriculture Credit’ (Chairman: Shri M. K. Jain) apart from discussions with all stakeholders. Further, these Master Directions encompass the revised guidelines on PSL for all Commercial banks, RRBs, SFBs, UCBs and LABs and, accordingly, supersede the earlier Master Directions on PSL issued separately for Scheduled Commercial Banks, RRBs, SFBs and guidelines issued for UCBs, respectively. The list of circulars consolidated in these Master Directions is indicated in the Appendix. The Master Directions have been placed on the RBI website www.rbi.org.in. Yours faithfully, (Gautam Prasad Borah) INDEX Master Directions- Reserve Bank of India (Priority Sector Lending – In exercise of the powers conferred by Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949, the Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified. CHAPTER – I 1. Short Title and Commencement 1.1 These Directions shall be called the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2020. 1.2 These Directions shall come into effect on the day they are placed on the official website of the Reserve Bank of India. The provisions of these Directions shall apply to every Commercial Bank [including Regional Rural Bank (RRB), Small Finance Bank (SFB), Local Area Bank] and Primary (Urban) Co-operative Bank (UCB) other than Salary Earners’ Bank licensed to operate in India by the Reserve Bank of India. 3. Definitions/ Clarifications 3.1 In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below:
3.2 All other expressions, unless defined herein, shall have the same meaning as has been assigned to them under the Banking Regulation Act, 1949 or the Reserve Bank of India Act, 1934 or any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be. 3.3 Banks must ensure that loans extended under priority sector are for approved purposes and the end use is continuously monitored. The banks should put in place proper internal controls and systems in this regard. CHAPTER – II 4. The categories under priority sector are as follows: The details of eligible activities under the above categories are specified in Chapter III. 5. Targets /Sub-targets for Priority sector 5.1 The targets and sub-targets set under priority sector lending, to be computed on the basis of the ANBC/ CEOBE as applicable as on the corresponding date of the preceding year, are as under:
5.2 The targets for lending to SMFs and for Weaker Sections shall be revised upwards from FY 2021-22 onwards as follows:
5.3 All domestic banks (other than UCBs) and foreign banks with more than 20 branches are directed to ensure that the overall lending to Non-Corporate Farmers (NCFs) does not fall below the system-wide average of the last three years’ achievement which will be separately notified every year. The applicable target for lending to the non-corporate farmers for FY 2020-21 will be 12.14% of ANBC or CEOBE whichever is higher. All efforts should be made by banks to reach the level of 13.5 percent of ANBC (erstwhile target for direct lending to agriculture sector). 6. Computation of Adjusted Net Bank Credit (ANBC) 6.1 For the purpose of priority sector lending, ANBC denotes the outstanding Bank Credit in India [As prescribed in item No.VI of Form ‘A’ under Section 42 (2) of the RBI Act, 1934] and computed as follows:
6.2 For the purpose of calculation of CEOBE, banks may be guided by the Master Circular on Exposure Norms issued by Department of Regulation, RBI vide DBR.No.Dir.BC.12/13.03.00/ 2015-16 dated July 1, 2015 and as updated from time to time. UCBs may be guided by the relevant provisions of the Master Circular dated July 1, 2015 on ‘Prudential Norms on Capital Adequacy - UCBs’ issued by Reserve Bank of India. 6.3 SFBs may be further guided by Para 6.5 (ii to vii) of the Operating Guidelines for Small Finance Banks issued by Department of Regulation (RBI/2016-17/81 DBR.NBD. No.26/16.13.218/2016-17 dated October 06, 2016), pertaining to treatment of grandfathered loans, for computation of ANBC. 6.4 While calculating Net Bank Credit as above, if banks subtract prudential write off at Corporate/Head Office level, it must be ensured that the credit to priority sector and all other sub-sectors so written off should also be subtracted category wise from priority sector and sub-target achievement. Wherever, investments or any other items which are treated as eligible for classification under priority sector target/sub-target achievement, the same should also form part of Adjusted Net Bank Credit. 6.5 All the banks have to adhere to the respective licencing guidelines and operating guidelines issued by the Department of Regulation, RBI and updated from time to time 7. Adjustments for weights in PSL Achievement To address regional disparities in the flow of priority sector credit at the district level, it has been decided to rank districts on the basis of per capita credit flow to priority sector and build an incentive framework for districts with comparatively lower flow of credit and a dis-incentive framework for districts with comparatively higher flow of priority sector credit. Accordingly, from FY 2021-22 onwards, a higher weight (125%) would be assigned to the incremental priority sector credit in the identified districts where the credit flow is comparatively lower (per capita PSL less than ₹6000), and a lower weight (90%) would be assigned for incremental priority sector credit in the identified districts where the credit flow is comparatively higher (per capita PSL greater than ₹25,000). The list of both categories of districts is given in Annex IA & IB. This list will be valid for a period up to FY 2023-24 and will be reviewed thereafter. The districts other than those mentioned in Annex IA and IB will continue to have existing weightage of 100%. The banks should continue to report the actual outstanding amount in QPSA returns as hitherto. Adjustments for weights to incremental PSL credit will be done by RBI, based on reporting of district wise credit flow to FIDD, CO through the ADEPT database. RRBs, UCBs, LABs and foreign banks (including WoS) would be exempted from adjustments of weights in PSL achievement due to their currently limited area of operation/catering to a niche segment. CHAPTER – III The lending to agriculture sector will include Farm Credit (Agriculture and Allied Activities), lending for Agriculture Infrastructure and Ancillary Activities. 8.1 Farm Credit - Individual farmers Loans to individual farmers [including Self Help Groups (SHGs) or Joint Liability Groups (JLGs) i.e. groups of individual farmers, provided banks maintain disaggregated data of such loans] and Proprietorship firms of farmers, directly engaged in Agriculture and Allied Activities, viz. dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture. This will include:
8.2 Farm Credit - Corporate farmers, Farmer Producer Organisations (FPOs)/(FPC) Companies of Individual Farmers, Partnership firms and Co-operatives of farmers engaged in Agriculture and Allied Activities (a) Loans for the following activities will be subject to an aggregate limit of ₹2 crore per borrowing entity:
(b) Loans up to ₹50 lakh against pledge/hypothecation of agricultural produce (including warehouse receipts2) for a period not exceeding 12 months. (c) Loans up to ₹5 crore per borrowing entity to FPOs/FPCs undertaking farming with assured marketing of their produce at a pre-determined price. (d) UCBs are not permitted to lend to co-operatives of farmers. 8.3 Agriculture Infrastructure Loans for agriculture infrastructure will be subject to an aggregate sanctioned limit of ₹100 crore per borrower from the banking system. List of activities is furnished in Annex II. 8.4 Ancillary Services 8.4.1 Following loans under ancillary services will be subject to limits prescribed as under:
8.4.2 Outstanding deposits under RIDF and other eligible funds with NABARD on account of priority sector shortfall. 8.4.3 The eligible activities under ancillary services and food and agro-processing is given in Annex II and Annex III, respectively. 8.5 Small and Marginal Farmers (SMFs) For the purpose of computation of achievement of the sub-target, Small and Marginal Farmers will include the following:
8.6 Lending by banks to NBFCs and MFIs for on-lending in agriculture
9. Micro, Small and Medium Enterprises (MSMEs) The definition of MSMEs will be as per Government of India (GoI), Gazette Notification S.O. 2119 (E) dated June 26, 2020 read with circular RBI/2020-2021/10 FIDD.MSME & NFS.BC.No.3/06.02.31/2020-21 read with FIDD.MSME & NFS. BC. No.4/06.02.31/2020-21 dated July 2, 2020, August 21, 2020 respectively on ‘Credit flow to Micro, Small and Medium Enterprises Sector’ and updated from time to time. Further, such MSMEs should be engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 or engaged in providing or rendering of any service or services. All bank loans to MSMEs conforming to the above guidelines qualify for classification under priority sector lending. 9.1 Factoring Transactions (not applicable to RRBs and UCBs)
9.2 Khadi and Village Industries Sector (KVI) All loans to units in the KVI sector will be eligible for classification under the sub-target of 7.5 percent prescribed for Micro Enterprises under priority sector. 9.3 Other Finance to MSMEs
10. Export Credit (not applicable to RRBs and LABs) Export credit under agriculture and MSME sectors are allowed to be classified as PSL in the respective categories viz. agriculture and MSME. Export Credit (other than in agriculture and MSME) will be allowed to be classified as priority sector as per the following table:
10.1 Export credit includes pre-shipment and post-shipment export credit (excluding off-balance sheet items) as defined in Master Circular on Rupee / Foreign Currency Export Credit and Customer Service to Exporters issued by Department of Regulation, RBI vide DBR No.DIR.BC.14/04.02.002/2015-16 dated July 1, 2015 and updated from time to time. Loans to individuals for educational purposes, including vocational courses, not exceeding ₹ 20 lakh will be considered as eligible for priority sector classification. Loans currently classified as priority sector will continue till maturity. 12.1 Bank loans to Housing sector as per limits prescribed below are eligible for priority sector classification:
12.2 Loans up to ₹10 lakh in metropolitan centres and up to ₹6 lakh in other centres for repairs to damaged dwelling units conforming to the overall cost of the dwelling unit as prescribed in para 12.1. 12.3 Bank loans to any governmental agency for construction of dwelling units or for slum clearance and rehabilitation of slum dwellers subject to dwelling units with carpet area of not more than 60 sq.m. 12.4 Bank loans for affordable housing projects using at least 50% of FAR/FSI for dwelling units with carpet area of not more than 60 sq.m. 12.5 Bank loans to HFCs (approved by NHB for their refinance) for on-lending, up to ₹20 lakh for individual borrowers, for purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to conditions specified in para 23 and 24. 12.6 Outstanding deposits with NHB on account of priority sector shortfall. Bank loans to social infrastructure sector as per limits prescribed below are eligible for priority sector classification 13.1. Bank loans up to a limit of ₹5 crore per borrower for setting up schools, drinking water facilities and sanitation facilities including construction/ refurbishment of household toilets and water improvements at household level, etc. and loans up to a limit of ₹10 crore per borrower for building health care facilities including under ‘Ayushman Bharat’ in Tier II to Tier VI centres. In case of UCBs, the above limits are applicable only in centres having a population of less than one lakh. 13.2. # Bank loans to MFIs extended for on-lending to individuals and also to members of SHGs/JLGs for water and sanitation facilities subject to the criteria laid down in paragraph 21 of these Master Directions. # not applicable to RRBs, UCBs and SFBs. Bank loans up to a limit of ₹30 crore to borrowers for purposes like solar based power generators, biomass-based power generators, wind mills, micro-hydel plants and for non-conventional energy based public utilities, viz., street lighting systems and remote village electrification etc., will be eligible for Priority Sector classification. For individual households, the loan limit will be ₹10 lakh per borrower. The following loans as per the prescribed limits are eligible for priority sector classification: 15.1. Loans not exceeding ₹1.00 lakh per borrower provided directly by banks to individuals and individual members of SHG/JLG, provided the individual borrower’s household annual income in rural areas does not exceed ₹1.00 lakh and for non-rural areas it does not exceed ₹1.60 lakh, and loans not exceeding ₹2.00 lakh provided directly by banks to SHG/JLG for activities other than agriculture or MSME, viz., loans for meeting social needs, construction or repair of house, construction of toilets or any viable common activity started by the SHGs. 15.2. Loans to distressed persons [other than distressed farmers indebted to non-institutional lenders] not exceeding ₹1.00 lakh per borrower to prepay their debt to non-institutional lenders. 15.3. Loans sanctioned to State Sponsored Organisations for Scheduled Castes/ Scheduled Tribes for the specific purpose of purchase and supply of inputs and/or the marketing of the outputs of the beneficiaries of these organisations. 15.4. Loans up to ₹50 crore to Start-ups, as per definition of Ministry of Commerce and Industry, Govt. of India that are engaged in activities other than Agriculture or MSME. 16.1 Priority sector loans to the following borrowers will be considered as lending under Weaker Sections category:
16.2 Overdraft availed by PMJDY account holders as per limits and conditions prescribed by Department of Financial Services, Ministry of Finance from time to time may be classified under Weaker Sections. 16.3 In States, where one of the minority communities notified is, in fact, in majority, item (xi) will cover only the other notified minorities. These States/ Union Territories are Punjab, Meghalaya, Mizoram, Nagaland, Lakshadweep and Jammu & Kashmir. CHAPTER IV 17. Investments by banks in securitised assets (not applicable to RRBs and UCBs) Investments by banks in ‘securitised assets’, representing loans to various categories of priority sector, except 'others' category, are eligible for classification under respective categories of priority sector depending on the underlying assets provided:
18. Transfer of Assets through Direct Assignment /Outright purchase (not applicable to RRBs and UCBs) Assignment/outright purchase of pool of assets by banks representing loans under various categories of priority sector, except the ‘others’ category, will be eligible for classification under respective categories of priority sector provided:
19. Inter Bank Participation Certificates (IBPCs) (not applicable to UCBs)
20. Priority Sector Lending Certificates (PSLCs) The outstanding PSLCs bought by banks will be eligible for classification under respective categories of priority sector provided the underlying assets originated by banks are eligible to be classified as priority sector advances and fulfil the Reserve Bank of India guidelines on Priority Sector Lending Certificates issued vide Circular FIDD.CO.Plan.BC.23/04.09.001/2015-16 dated April 7, 2016. SFBs may further be guided by the terms and conditions specified in Para 1.9 of DBR circular No. DBR.NBD.26/16.13.218/2016-17 dated October 6, 2016 on credit risk transfer and portfolio sales/purchases. 21. Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for on-lending (not applicable to RRBs, UCBs, SFBs and LABs) Bank credit extended to registered NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised SRO for the sector, for on-lending to individuals and also to members of SHGs / JLGs will be eligible for categorisation as priority sector advance under respective categories viz., Agriculture, MSME, Social Infrastructure and Others, provided the MFIs adhere to the conditions prescribed in Chapter II (xx) and Chapter VIII of Master Directions DNBR PD.007 and Chapter II (xx) and Chapter IX of Master Directions DNBR PD.008/03.10.119/2016-17 dated September 1, 2016 and as updated from time to time. 22. Bank loans to NBFCs for on-lending (not applicable to RRBs, UCBs, SFBs and LABs) Bank credit to registered NBFCs (other than MFIs) for on-lending will be eligible for classification as priority sector under respective categories subject to the following conditions:
The above dispensation shall be valid upto March 31, 2021 and will be reviewed thereafter. However, loans disbursed under the on-lending model will continue to be classified under Priority Sector till the date of repayment/maturity. 23. Bank loans to HFCs for on-lending (not applicable to RRBs, SFBs and LABs) Bank credit to Housing Finance Companies (HFCs), approved by NHB for their refinance, for on-lending for the purpose of purchase/construction/ reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to an aggregate loan limit of ₹20 lakh per borrower. Banks should maintain necessary borrower-wise details of the underlying portfolio. Bank credit to NBFCs (including HFCs) for on-lending as applicable in para 22 and 23 above, will be allowed up to an overall limit of five percent of individual bank’s total priority sector lending. Banks shall compute the eligible portfolio under on-lending mechanism by averaging across four quarters, to determine adherence to the prescribed cap. 25. Co-origination of loans by Banks and NBFCs for lending to priority sector (not applicable to RRBs, UCBs, SFBs and LABs) All commercial banks may engage with NBFCs-ND-SI (hereinafter referred to as NBFC) to co-originate loans for the creation of priority sector assets. The arrangement should entail joint contribution of credit at the facility level, by both lenders. It should also involve sharing of risks and rewards between the bank and the NBFC for ensuring appropriate alignment of respective business objectives, as per the mutually decided agreement between the bank and the NBFC. Detailed guidelines, in this regard, have been issued vide our circular No. FIDD.CO.Plan.BC/08/04.09.01/2018-19 dated September 21, 2018. 26. Monitoring of Priority Sector Lending targets To ensure continuous flow of credit to priority sector, the compliance of banks will be monitored on ‘quarterly’ basis. The data on priority sector advances is required to be furnished by banks to FIDD, Central Office at quarterly and annual intervals as per the reporting format (quarterly and annual). In respect of RRBs, the data on priority sector advances, in the above format, must be furnished to NABARD at quarterly and annual intervals. In respect of UCBs, the data on priority sector advances in the reporting formats ‘Statement I’ and ‘Statement II (Part A to D)’ shall be furnished at quarterly and annual intervals, to the Regional Office of DoS, RBI. 27. Non-achievement of Priority Sector targets
28. Common guidelines for priority sector loans Banks should comply with the following common guidelines for all categories of advances under the priority sector.
List of Districts with comparatively high PSL credit
List of Districts with comparatively low PSL credit
Indicative list of Permissible Activities under Food Processing Sector as shared by Ministry of Food Processing Industries (MoFPI)
Priority Sector achievement - Calculation of shortfall / excess Illustration: Tables No.1 and 2 below illustrate the method followed for computation of shortfall / excess in priority sector target achievement at the end of the financial year under the revised PSL guidelines. In the example given in Table - 1, the bank has overall shortfall of ₹2063 crore at the end of the financial year. In Table – 2, the bank has overall excess of ₹2293 crore at the end of the financial year. The Adjustments due to weightage on incremental credit in identified districts as per para 7, will be as per the data submitted by banks in the Automated Data Extraction Project (ADEPT). The same method will be followed for calculating the achievement of quarterly and yearly priority sector sub-targets. Note: The computation of priority sector targets/sub-targets achievement will be based on the ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposures, whichever is higher, as at the corresponding date of the preceding year. LIST OF CIRCULARS CONSOLIDATED
1 Includes negotiable warehouse receipt (NWR) and electronic negotiable warehouse receipt (e-NWR) 2 Includes negotiable warehouse receipt (NWR) and electronic negotiable warehouse receipt (e-NWR) |