RBI/2013-14/515
RPCD.CO.Plan.BC 91/04.09.01/2013-14

March 12, 2014

The Chairman/ Managing Director/
Chief Executive Officer
[All scheduled commercial banks
(excluding Regional Rural Banks)]

Dear Sir,

Priority Sector Lending-Targets and Classification-Bank loans to MFIs for on-lending-pricing criteria

Please refer to paragraphs VIII (c) (i) and (ii) of our master circular No. RPCD.CO.Plan.BC.9/04.09.01/2013-14 dated July 1, 2013 on Priority Sector Lending-Targets and Classification.

2. On a review of the above provision, it has been decided that banks have to ensure MFIs comply with the cap on individual loans and margin cap as under in order to be eligible to classify these loans under priority sector as under:-.

(i) Cap on individual loans: - The average Base Rate of five largest commercial banks by assets multiplied by 2.75 per annum or cost of funds plus margin cap, whichever is less. The average of the Base Rate shall be advised by Reserve Bank of India.

(ii) Margin cap: Further, with effect from April 1, 2014, the margin cap shall not exceed 10 percent for MFIs having loan portfolio exceeding Rs.100 crore and 12 percent for others, as against 12 percent for all hitherto.

3. All other guidelines in terms of Para VIII of circular No. RPCD.CO.Plan. BC.9/04.09.01/ 2013-14 dated July 1, 2013 will remain unchanged.

Yours faithfully,

(T.V.Rao)
Deputy General Manager