RBI/FIDD/2016-17/33
Master Direction FIDD.CO.Plan.1/04.09.01/2016-17
July
7, 2016
The Chairman / Managing
Director/
Chief Executive Officer
[All Scheduled Commercial Banks,
(excluding Regional Rural Banks)]
Dear Sir/ Madam,
MASTER
DIRECTION-PRIORITY SECTOR LENDING-TARGETS
AND CLASSIFICATION
The Reserve Bank of India has,
from time to time, issued a number of guidelines/instructions/directives to
banks on Priority Sector Lending. The Master Direction enclosed
incorporates the updated guidelines/ instructions/ circulars on the
subject. The list of circulars consolidated in this Master Direction is
indicated in the Appendix. The Direction
will be updated from time to time as and when fresh instructions are
issued. This Master Direction has
been placed on the RBI website at rbi.org.in.
2. The guidelines on priority
sector lending were revised vide our circular dated April 23, 2015. The
priority sector loans sanctioned under the guidelines issued prior to April
23, 2015 will continue to be classified under priority sector till
repayment/maturity/renewal.
Yours faithfully,
(A. Udgata)
Principal Chief General Manager
Master
Direction- Reserve Bank of India
(Priority Sector Lending –Targets and Classification) Directions, 2016
In exercise of the powers
conferred by Sections 21 and 35 A 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
PRELIMINARY
1. Short Title and Commencement
(a) These Directions shall be
called the Reserve Bank of India (Priority Sector Lending – Targets and
Classification) Directions, 2016.
(b) These Directions shall come
into effect on the day they are placed on the official website of the
Reserve Bank of India.
2. Applicability
The provisions of these
Directions shall apply to every Scheduled Commercial Bank {excluding
Regional Rural Banks (RRBs)} licensed to operate in India by the Reserve
Bank of India.
3. Definitions/ Clarifications
(a) In these Directions, unless
the context otherwise requires, the terms herein shall bear the meanings
assigned to them below:
i.
On-lending
means loans sanctioned by banks to eligible intermediaries for onward
lending only for creation of priority sector assets. The average maturity
of priority sector assets thus created should be broadly co-terminus with
maturity of the bank loan.
ii.
Contingent
liabilities/off-balance sheet items do not form part of priority sector
target achievement. However, foreign banks with less than 20 branches have
an option to reckon the credit equivalent of off-balance sheet items,
extended to borrowers for eligible priority sector activities, along with
priority sector loans for the purpose of computation of priority sector
target achievement. In that case, the credit equivalent of all off-balance
sheet items (both priority sector and non-priority sector excluding
interbank) should be added to the ANBC in the denominator for computation
of Priority Sector Lending targets.
iii.
Off-balance
sheet interbank exposures are excluded for computing Credit Equivalent of
Off -Balance Sheet Exposures for the priority sector targets.
iv.
The
term “all inclusive interest” includes interest (effective annual
interest), processing fees and service charges.
(b) Banks should 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.
(c) All other expressions unless
defined herein shall have the same meaning as have been assigned to them
under the Banking Regulation Act or the Reserve Bank of India Act, or any
statutory modification or re-enactment thereto or as used in commercial parlance,
as the case may be.
CHAPTER
- II
CATEGORIES
AND TARGETS UNDER PRIORITY SECTOR
4. The categories under priority
sector are as follows:
i.
Agriculture
ii.
Micro, Small and Medium Enterprises
iii.
Export Credit
iv.
Education
v.
Housing
vi.
Social Infrastructure
vii.
Renewable Energy
viii.
Others
The details of eligible
activities under the above categories are specified in Chapter III.
5. Targets /Sub-targets for
Priority sector
(i) The targets and sub-targets
set under priority sector lending for all scheduled commercial banks
operating in India are furnished below:
Categories
|
Domestic
scheduled commercial banks and Foreign banks with 20 branches and above
|
Foreign
banks with less than 20 branches
|
Total
Priority Sector
|
40 percent of Adjusted Net
Bank Credit [ANBC defined in sub paragraph (iii)] or Credit Equivalent
Amount of Off-Balance Sheet Exposure, whichever is higher.
Foreign banks with 20 branches
and above have to achieve the Total Priority Sector Target within a
maximum period of five years starting from April 1, 2013 and ending on
March 31, 2018 as per the action plans submitted by them and approved by
RBI.
|
40 percent of Adjusted Net
Bank Credit [ANBC defined in sub paragraph (iii)] or Credit Equivalent
Amount of Off-Balance Sheet Exposure, whichever is higher; to be achieved
in a phased manner by 2020 as indicated in sub paragraph (ii) below.
|
Agriculture
|
18 percent of ANBC or Credit
Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher.
Within the 18 percent target
for agriculture, a target of 8 percent of ANBC or Credit Equivalent
Amount of Off-Balance Sheet Exposure, whichever is higher is prescribed
for Small and Marginal Farmers.
Foreign banks with 20 branches
and above have to achieve the Agriculture Target within a maximum period
of five years starting from April 1, 2013 and ending on March 31, 2018 as
per the action plans submitted by them and approved by RBI. The
sub-target for Small and Marginal farmers would be made applicable post
2018 after a review in 2017.
##
|
Not applicable
|
Micro
Enterprises
|
7.5 percent of ANBC or Credit
Equivalent Amount of Off-Balance Sheet Exposure.
The sub-target for Micro
Enterprises for foreign banks with 20 branches and above would be made
applicable post 2018 after a review in 2017.
|
Not Applicable
|
Advances
to Weaker Sections
|
10 percent of ANBC or Credit
Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher.
Foreign banks with 20 branches
and above have to achieve the Weaker Sections Target within a maximum
period of five years starting from April 1, 2013 and ending on March 31,
2018 as per the action plans submitted by them and approved by RBI.
|
Not Applicable
|
## Additionally, domestic banks
are directed to ensure that the overall lending to non-corporate farmers
does not fall below the system-wide average of the last three years
achievement. All efforts should be maintained to reach the level of 13.5
percent direct lending to the beneficiaries who earlier constituted the
direct agriculture sector. The applicable system wide average figure for
computing achievement under priority sector lending will be notified every
year. For FY 2015-16, the applicable system wide average figure is 11.57
percent.
(ii) The Total Priority Sector
target of 40 percent for foreign banks with less than 20 branches has to be
achieved in a phased manner as under:-
Financial
Year
|
The
Total Priority Sector as percentage of ANBC or Credit Equivalent Amount
of Off-Balance Sheet Exposure, whichever is higher
|
2015-16
|
32
|
2016-17
|
34
|
2017-18
|
36
|
2018-19
|
38
|
2019-20
|
40
|
The additional priority sector
lending target of 2 percent of ANBC each year from 2016-17 to 2019-20 has
to be achieved by lending to sectors other than exports. The sub targets
for these banks, if to be made applicable post 2020, would be decided in
due course.
(iii) 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 on the corresponding date of the preceding year. 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] minus bills rediscounted with RBI and other approved
Financial Institutions plus permitted non SLR bonds/debentures under Held
to Maturity (HTM) category plus other investments eligible to be treated as
part of priority sector lending (e.g. investments in securitised assets).
The outstanding deposits under RIDF and other funds with NABARD, NHB, SIDBI
and MUDRA Ltd. in lieu of non-achievement of priority sector lending
targets/sub-targets will form part of ANBC. Advances extended in India
against the incremental FCNR (B)/NRE deposits, qualifying for exemption
from CRR/SLR requirements, as per the Reserve Bank’s circulars DBOD.No.Ret.BC.36/12.01.001/2013-14 dated August 14,
2013 read with DBOD.No.Ret.BC.93/12.01.001/2013-14
dated January 31, 2014 and DBOD mailbox clarification issued on
February 6, 2014 will be excluded from the ANBC for computation of priority
sector lending targets, till their repayment. The eligible amount for
exemption on account of issuance of long-term bonds for infrastructure and
affordable housing as per Reserve Bank’s circular DBOD.BP.BC.No.25/08.12.014/2014-15 dated July 15, 2014 will
also be excluded from the ANBC for computation of priority sector lending
targets. For the purpose of calculation of Credit Equivalent Amount of Off-Balance
Sheet Exposures, banks may be guided by the Master Circular on Exposure
Norms issued by our Department of Banking Regulation.
Computation of Adjusted Net Bank
Credit (ANBC)
Bank Credit in India [As
prescribed in item No.VI of Form ‘A’ under Section 42 (2) of the RBI Act,
1934].
|
I
|
Bills Rediscounted with RBI
and other approved Financial Institutions
|
II
|
Net Bank Credit (NBC)*
|
III (I-II)
|
Bonds/debentures in Non-SLR
categories under HTM category+ other investments eligible to be treated
as priority sector +Outstanding Deposits under RIDF and other eligible
funds with NABARD, NHB, SIDBI and MUDRA Ltd. on account of priority
sector shortfall + outstanding PSLCs
|
IV
|
Eligible amount for exemptions
on issuance of long-term bonds for infrastructure and affordable housing
as per circular
DBOD.BP.BC.No.25/08.12.014/2014-15 dated July 15, 2014.
|
V
|
Eligible advances extended in
India against the incremental FCNR (B)/NRE deposits, qualifying for
exemption from CRR/SLR requirements.
|
VI
|
ANBC
|
III+IV-V-VI
|
* For the purpose of priority
sector computation only. Banks should not deduct / net any amount like
provisions, accrued interest, etc. from NBC.
|
It has been observed that some
banks are subtracting prudential write off at Corporate/Head Office level
while reporting Bank Credit as above. In such cases it must be ensured that
bank 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.
All types of loans, investments
or any other items which are treated as eligible for classification under
priority sector target/sub-target achievement should also form part of
Adjusted Net Bank Credit.
CHAPTER
- III
DESCRIPTION
OF ELIGIBLE CATEGORIES UNDER PRIORITY SECTOR
6. Agriculture
The lending to agriculture
sector has been defined to include (i) Farm Credit (which will include
short-term crop loans and medium/long-term credit to farmers) (ii)
Agriculture Infrastructure and (iii) Ancillary Activities. A list of
eligible activities under the three sub-categories is indicated below:
6.1 Farm credit
|
A. 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:
(i) Crop loans to farmers, which will include traditional/non-traditional
plantations and horticulture, and, loans for allied activities.
(ii) Medium and long-term loans to farmers for agriculture and allied
activities (e.g. purchase of agricultural implements and machinery, loans
for irrigation and other developmental activities undertaken in the farm,
and developmental loans for allied activities.)
(iii) Loans to farmers for pre and post-harvest activities, viz.,
spraying, weeding, harvesting, sorting, grading and transporting of their
own farm produce.
(iv) Loans to farmers up to ?50 lakh against pledge/hypothecation of
agricultural produce (including warehouse receipts) for a period not
exceeding 12 months.
(v) Loans to distressed farmers indebted to non-institutional lenders.
(vi) Loans to farmers under the Kisan Credit Card Scheme.
(vii) Loans to small and marginal farmers for purchase of land for
agricultural purposes.
B. Loans to corporate farmers, farmers' producer organizations/companies
of individual farmers, partnership firms and co-operatives of farmers directly
engaged in Agriculture and Allied Activities, viz., dairy, fishery,
animal husbandry, poultry, bee-keeping and sericulture up to an aggregate
limit of ?2 crore per borrower. This will include:
(i) Crop loans to farmers which will include traditional/non-traditional
plantations and horticulture, and, loans for allied activities.
(ii) Medium and long-term loans to farmers for agriculture and allied
activities (e.g. purchase of agricultural implements and machinery, loans
for irrigation and other developmental activities undertaken in the farm,
and developmental loans for allied activities.)
(iii) Loans to farmers for pre and post-harvest activities, viz.,
spraying, weeding, harvesting, sorting, grading and transporting of their
own farm produce.
(iv) Loans up to ?50 lakh against pledge/hypothecation of agricultural
produce (including warehouse receipts) for a period not exceeding 12
months.
|
6.2. Agriculture
infrastructure
|
i) Loans for construction of
storage facilities (warehouses, market yards, godowns and silos)
including cold storage units/ cold storage chains designed to store
agriculture produce/products, irrespective of their location.
ii) Soil conservation and watershed development.
iii) Plant tissue culture and agri-biotechnology, seed production,
production of bio-pesticides, bio-fertilizer, and vermi composting.
For the above loans, an aggregate sanctioned limit of ?100 crore per
borrower from the banking system, will apply.
|
6.3.Ancillary activities
|
(i) Loans up to ?5 crore to
co-operative societies of farmers for disposing of the produce of
members.
(ii) Loans for setting up of Agriclinics and Agribusiness Centres.
(iii) Loans for Food and Agro-processing up to an aggregate sanctioned
limit of ?100 crore per borrower from the banking system.
(iv) Loans to Custom Service Units managed by individuals, institutions
or organizations who maintain a fleet of tractors, bulldozers,
well-boring equipment, threshers, combines, etc., and undertake farm work
for farmers on contract basis.
(v) Bank loans to Primary Agricultural Credit Societies (PACS), Farmers’
Service Societies (FSS) and Large-sized Adivasi Multi-Purpose Societies
(LAMPS) for on-lending to agriculture.
(vi) Loans sanctioned by banks to MFIs for on-lending to agriculture
sector as per the conditions specified in paragraph 19 of these Master
Directions.
(vii) Outstanding deposits under RIDF and other eligible funds with
NABARD on account of priority sector shortfall.
|
For the purpose of computation
of achievement of the sub-target, Small and Marginal Farmers will include
the following:-
·
Farmers
with landholding of up to 1 hectare (Marginal Farmers). Farmers with a
landholding of more than 1 hectare and up to 2 hectares (Small Farmers).
·
Landless
agricultural labourers, tenant farmers, oral lessees and share-croppers,
whose share of landholding is within the limits prescribed for small and
marginal farmers.
·
Loans
to Self Help Groups (SHGs) or Joint Liability Groups (JLGs), i.e. groups of
individual Small and Marginal farmers directly engaged in Agriculture and
Allied Activities, provided banks maintain disaggregated data of such
loans.
·
Loans
to farmers' producer companies of individual farmers, and co-operatives of
farmers directly engaged in Agriculture and Allied Activities, where the
membership of Small and Marginal Farmers is not less than 75 per cent by
number and whose land-holding share is also not less than 75 per cent of
the total land-holding.
7. Micro, Small and Medium
Enterprises (MSMEs)
7.1. Limits for investment in
plant and machinery/ equipment: The
limits for investment in plant and machinery/equipment for manufacturing /
service enterprise, as notified by Ministry of Micro, Small and Medium
Enterprises, vide S.O.1642(E) dated September 9, 2006 are as under:-
Manufacturing Sector
|
Enterprises
|
Investment in plant and
machinery
|
Micro Enterprises
|
Does not exceed twenty five
lakh rupees
|
Small Enterprises
|
More than twenty five lakh
rupees but does not exceed five crore rupees
|
Medium Enterprises
|
More than five crore rupees
but does not exceed ten crore rupees
|
Service Sector
|
Enterprises
|
Investment in equipment
|
Micro Enterprises
|
Does not exceed ten lakh
rupees
|
Small Enterprises
|
More than ten lakh rupees but
does not exceed two crore rupees
|
Medium Enterprises
|
More than two crore rupees but
does not exceed five crore rupees
|
Bank loans to Micro, Small and
Medium Enterprises, for both manufacturing and service sectors are eligible
to be classified under the priority sector as per the following norms:
7.2. Manufacturing Enterprises
The Micro, Small and Medium
Enterprises engaged in the manufacture or production of goods to any
industry specified in the first schedule to the Industries (Development and
Regulation) Act, 1951 and as notified by the Government from time to time.
The Manufacturing Enterprises are defined in terms of investment in plant
and machinery.
7.3. Service Enterprises
Bank loans up to ? 5 crore per
unit to Micro and Small Enterprises and ? 10 crore to Medium Enterprises
engaged in providing or rendering of services and defined in terms of
investment in equipment under MSMED Act, 2006.
7.4. 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.
7.5. Other Finance to MSMEs
(i) Loans to entities involved
in assisting the decentralized sector in the supply of inputs to and
marketing of outputs of artisans, village and cottage industries.
(ii) Loans to co-operatives of
producers in the decentralized sector viz. artisans, village and cottage
industries.
(iii) Loans sanctioned by banks
to MFIs for on-lending to MSME sector as per the conditions specified in
paragraph 19 of these Master Directions.
(iv) Credit outstanding under
General Credit Cards (including Artisan Credit Card, Laghu Udyami Card,
Swarojgar Credit Card, and Weaver’s Card etc. in existence and catering to
the non-farm entrepreneurial credit needs of individuals).
(v) Overdrafts extended by banks
after April 8, 2015 upto ?5,000/- under Pradhan Mantri Jan Dhan Yojana
(PMJDY) accounts provided the borrower’s household annual income does not
exceed ? 100,000/- for rural areas and ? 1,60,000/- for non-rural areas.
These overdrafts will qualify as achievement of the target for lending to
Micro Enterprises.
(vi) Outstanding deposits with
SIDBI and MUDRA Ltd. on account of priority sector shortfall.
7.6. To ensure that MSMEs do not remain small and
medium units merely to remain eligible for priority sector status, the MSME
units will continue to enjoy the priority sector lending status up to three
years after they grow out of the MSME category concerned.
8. Export Credit
The Export Credit extended as
per the details below will be classified as priority sector.
Domestic
banks
|
Foreign
banks with 20 branches and above
|
Foreign
banks with less than 20 branches
|
Incremental export credit over
corresponding date of the preceding year, up to 2 percent of ANBC or
Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is
higher, effective from April 1, 2015 subject to a sanctioned limit of up
to ?25 crore per borrower to units having turnover of up to ?100 crore.
|
Incremental export credit over
corresponding date of the preceding year, up to 2 percent of ANBC or
Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is
higher, effective from April 1, 2017 (As per their approved plans,
foreign banks with 20 branches and above are allowed to count certain
percentage of export credit limit as priority sector till March 2017).
|
Export credit will be allowed
up to 32 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet
Exposure, whichever is higher.
|
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 our Department of
Banking Regulation.
9. Education
Loans to individuals for
educational purposes including vocational courses upto ?10 lakh
irrespective of the sanctioned amount will be considered as eligible for
priority sector.
10. Housing
10.1 Loans to individuals up to ?28 lakh in metropolitan
centres (with population of ten lakh and above) and loans up to ?20 lakh in
other centres for purchase/construction of a dwelling unit per family
provided the overall cost of the dwelling unit in the metropolitan centre
and at other centres should not exceed ?35 lakh and ?25 lakh, respectively.
The housing loans to banks’ own employees will be excluded. As housing
loans which are backed by long term bonds are exempted from ANBC, banks
should either include such housing loans to individuals up to ?28 lakh in
metropolitan centres and ?20 lakh in other centres under priority sector or
take benefit of exemption from ANBC, but not both.
10.2 Loans for repairs to damaged dwelling units of
families up to ?5 lakh in metropolitan centres and up to ?2 lakh in other
centres.
10.3 Bank loans to any governmental agency for
construction of dwelling units or for slum clearance and rehabilitation of
slum dwellers subject to a ceiling of ?10 lakh per dwelling unit.
10.4 The loans sanctioned by banks for housing projects
exclusively for the purpose of construction of houses for economically
weaker sections and low income groups, the total cost of which does not
exceed ?10 lakh per dwelling unit. For the purpose of identifying the
economically weaker sections and low income groups, the family income limit
of ?2 lakh per annum, irrespective of the location, is prescribed.
10.5 Bank loans 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 ?10 lakh per borrower.
The eligibility under priority
sector loans to HFCs is restricted to five percent of the individual bank’s
total priority sector lending, on an ongoing basis. The maturity of bank
loans should be co-terminus with average maturity of loans extended by
HFCs. Banks should maintain necessary borrower-wise details of the
underlying portfolio.
10.6 Outstanding deposits with NHB on account of
priority sector shortfall.
11. Social infrastructure
11.1. Bank loans up to a limit of ?5 crore per borrower
for building social infrastructure for activities namely schools, health
care facilities, drinking water facilities and sanitation facilities
including construction/ refurbishment of household toilets and household
level water improvements in Tier II to Tier VI centres.
11.2. Bank credit to Micro Finance Institutions (MFIs)
extended for on-lending to individuals and also to members of SHGs/JLGs for
water and sanitation facilities will be eligible for categorization as
priority sector under ‘Social Infrastructure’, subject to the criteria laid
down in paragraph 19 of these Master Directions.
12. Renewable Energy
Bank loans up to a limit of ?15
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. For individual households, the
loan limit will be ?10 lakh per borrower.
13. Others
13.1. Loans not exceeding ?50,000/- per borrower
provided directly by banks to individuals and their SHG/JLG, provided the
individual borrower’s household annual income in rural areas does not
exceed ?1,00,000/- and for non-rural areas it does not exceed ?1,60,000/-.
13.2. Loans to distressed persons [other than farmers
included under paragraph 6(6.1)(A)(v)] not exceeding ?1,00,000/- per
borrower to prepay their debt to non-institutional lenders.
13.3. 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.
14. Weaker Sections
Priority sector loans to the
following borrowers will be considered under Weaker Sections category:-
No.
|
Category
|
(i)
|
Small and Marginal Farmers
|
(ii)
|
Artisans, village and cottage
industries where individual credit limits do not exceed ?1 lakh
|
(iii)
|
Beneficiaries under Government
Sponsored Schemes such as National Rural Livelihood Mission (NRLM),
National Urban Livelihood Mission (NULM) and Self Employment Scheme for
Rehabilitation of Manual Scavengers (SRMS)
|
(iv)
|
Scheduled Castes and Scheduled
Tribes
|
(v)
|
Beneficiaries of Differential
Rate of Interest (DRI) scheme
|
(vi)
|
Self Help Groups
|
(vii)
|
Distressed farmers indebted to
non-institutional lenders
|
(viii)
|
Distressed persons other than
farmers, with loan amount not exceeding ?1 lakh per borrower to prepay
their debt to non-institutional lenders
|
(ix)
|
Individual women beneficiaries
up to ?1 lakh per borrower
|
(x)
|
Persons with disabilities
|
(xi)
|
Overdrafts upto ?5,000/- under
Pradhan Mantri Jan-DhanYojana (PMJDY) accounts, provided the borrower’s
household annual income does not exceed ?100,000/- for rural areas and
?1,60,000/- for non-rural areas
|
(xii)
|
Minority communities as may be
notified by Government of India from time to time.
|
In States, where one of the
minority communities notified is, in fact, in majority, item (xii) will
cover only the other notified minorities. These States/ Union Territories
are Jammu & Kashmir, Punjab, Meghalaya, Mizoram, Nagaland and
Lakshadweep.
CHAPTER
IV
MISCELLANEOUS
15. Investments by banks in
securitised assets
(i) 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:
(a) the securitised assets are
originated by banks and financial institutions and are eligible to be
classified as priority sector advances prior to securitisation and fulfil
the Reserve Bank of India guidelines on securitisation.
(b) the all inclusive interest
charged to the ultimate borrower by the originating entity should not
exceed the Base Rate of the investing bank plus 8 percent per annum.
The investments in securitised
assets originated by MFIs, which comply with the guidelines in Paragraph 19
of these Master Directions are exempted from this interest cap as there are
separate caps on margin and interest rate.
(ii) Investments made by banks
in securitised assets originated by NBFCs, where the underlying assets are
loans against gold jewellery, are not eligible for priority sector status.
16. Transfer of Assets through
Direct Assignment /Outright purchases
(i) Assignments/Outright
purchases 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:
(a) the assets are originated by
banks and financial institutions which are eligible to be classified as
priority sector advances prior to the purchase and fulfil the Reserve Bank
of India guidelines on outright purchase/assignment.
(b) the eligible loan assets so
purchased should not be disposed of other than by way of repayment.
(c) the all inclusive interest
charged to the ultimate borrower by the originating entity should not
exceed the Base Rate of the purchasing bank plus 8 percent per annum.
The Assignments/Outright
purchases of eligible priority sector loans from MFIs, which comply with
the guidelines in Paragraph 19 of these Master Directions are exempted from
this interest rate cap as there are separate caps on margin and interest
rate.
(ii) When the banks undertake
outright purchase of loan assets from banks/ financial institutions to be
classified under priority sector, they must report the nominal amount
actually disbursed to end priority sector borrowers and not the premium
embedded amount paid to the sellers.
(iii) Purchase/
assignment/investment transactions undertaken by banks with NBFCs, where
the underlying assets are loans against gold jewellery, are not eligible
for priority sector status.
17. Inter Bank Participation
Certificates
Inter Bank Participation
Certificates (IBPCs) bought by banks, on a risk sharing basis, are eligible
for classification under respective categories of priority sector, provided
the underlying assets are eligible to be categorized under the respective
categories of priority sector and the banks fulfil the Reserve Bank of
India guidelines on IBPCs.
With regard to the underlying
assets of the IBPC transactions being eligible for categorization under
‘Export Credit’ as per Para 8, the IBPC bought by banks, on a risk sharing
basis, may be classified from purchasing bank’s perspective for priority
sector categorization. However, in such a scenario, the issuing bank shall certify
that the underlying asset is ‘Export Credit’, in addition to the due
diligence required to be undertaken by the issuing and the purchasing bank
as per the guidelines in this regard.
18. Priority Sector Lending
Certificates
The outstanding priority sector
lending certificates bought by banks will be eligible for classification
under respective categories of priority sector provided the assets are
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.23/04.09.01/2015-16 dated April 7, 2016.
19. Bank loans to MFIs for
on-lending
(a) Bank credit to MFIs extended
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, Micro, Small and Medium Enterprises, Social
Infrastructure [mentioned in paragraph 11(11.2)] and Others, provided not
less than 85 percent of total assets of MFI (other than cash, balances with
banks and financial institutions, government securities and money market
instruments) are in the nature of “qualifying assets”. In addition,
aggregate amount of loan, extended for income generating activity, should
be not less than 50 percent of the total loans given by MFIs.
(b) A “qualifying asset” shall
mean a loan disbursed by MFI, which satisfies the following criteria:
(i) The loan is to be extended
to a borrower whose household annual income in rural areas does not exceed ?1,00,000/-
while for non-rural areas it should not exceed ?1,60,000/-.
(ii) Loan does not exceed ?60,000/-
in the first cycle and ?100,000/- in the subsequent cycles.
(iii) Total indebtedness of the
borrower does not exceed ?1,00,000/-.
(iv) Tenure of loan is not less
than 24 months when loan amount exceeds ?15,000/- with right to borrower of
prepayment without penalty.
(v) The loan is without
collateral.
(vi) Loan is repayable by
weekly, fortnightly or monthly installments at the choice of the borrower.
(c) Further, the banks have to
ensure that MFIs comply with the following caps on margin and interest rate
as also other ‘pricing guidelines’, to be eligible to classify these loans
as priority sector loans.
(i) Margin cap: The margin cap
should not exceed 10 percent for MFIs having loan portfolio exceeding ?100
crore and 12 percent for others. The interest cost is to be calculated on
average fortnightly balances of outstanding borrowings and interest income
is to be calculated on average fortnightly balances of outstanding loan
portfolio of qualifying assets.
(ii) Interest cap on individual
loans: With effect from April 1, 2014, interest rate on individual loans
will be 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.
(iii) Only three components are
to be included in pricing of loans viz., (a) a processing fee not exceeding
1 percent of the gross loan amount, (b) the interest charge and (c) the insurance
premium.
(iv) The processing fee is not
to be included in the margin cap or the interest cap.
(v) Only the actual cost of
insurance i.e. actual cost of group insurance for life, health and
livestock for borrower and spouse can be recovered; administrative charges
may be recovered as per IRDA guidelines.
(vi) There should not be any
penalty for delayed payment.
(vii) No Security Deposit/
Margin is to be taken.
(d) The banks should obtain from
MFI, at the end of each quarter, a Chartered Accountant’s Certificate
stating, inter-alia, that the criteria on (i) qualifying assets, (ii) the
aggregate amount of loan, extended for income generation activity, and
(iii) pricing guidelines are followed.
20. 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 has to be furnished
by banks at quarterly and annual intervals as per the reporting formats
prescribed vide Circular FIDD.CO.Plan.BC.58/04.09.01/2014-15
dated June 11, 2015 on Priority Sector Lending – Revised
Reporting System.
21. Non-achievement of Priority
Sector targets
Scheduled Commercial Banks
having any shortfall in lending to priority sector shall be allocated
amounts for contribution to the Rural Infrastructure Development Fund
(RIDF) established with NABARD and other Funds with NABARD/NHB/SIDBI/ MUDRA
Ltd. , as decided by the Reserve Bank from time to time. The achievement
will be arrived at the end of financial year based on the average of
priority sector target /sub-target achievement as at the end of each
quarter.
While computing priority sector
target achievement, shortfall / excess lending for each quarter will be
monitored separately. A simple average of all quarters will be arrived at
and considered for computation of overall shortfall / excess at the end of
the year. The same method will be followed for calculating the achievement
of priority sector sub-targets. (Illustrative example given in Annex A)
The interest rates on banks’
contribution to RIDF or any other Funds, tenure of deposits, etc. shall be
fixed by Reserve Bank of India from time to time.
The misclassifications reported
by the Reserve Bank’s Department of Banking Supervision would be adjusted/
reduced from the achievement of that year, to which the amount of
declassification/ misclassification pertains, for allocation to various
funds in subsequent years.
Non-achievement of priority
sector targets and sub-targets will be taken into account while granting
regulatory clearances/approvals for various purposes.
22. Common guidelines for
priority sector loans
Banks should comply with the
following common guidelines for all categories of advances under the
priority sector.
(i) Rate of interest
The rates of interest on bank
loans will be as per directives issued by our Department of Banking
Regulation from time to time.
(ii) Service charges
No loan related and adhoc
service charges/inspection charges should be levied on priority sector
loans up to ?25,000. In the case of eligible priority sector loans to SHGs/
JLGs, this limit will be applicable per member and not to the group as a
whole.
(iii) Receipt,
Sanction/Rejection/Disbursement Register
A register/ electronic record
should be maintained by the bank, wherein the date of receipt,
sanction/rejection/disbursement with reasons thereof, etc., should be
recorded. The register/electronic record should be made available to all
inspecting agencies.
(iv) Issue of Acknowledgement of
Loan Applications
Banks should provide
acknowledgement for loan applications received under priority sector loans.
Bank Boards should prescribe a time limit within which the bank
communicates its decision in writing to the applicants.
APPENDIX
LIST
OF CIRCULARS CONSOLIDATED
S.No.
|
Circular
No.
|
Date
|
Subject
|
1.
|
DBOD Mailbox clarification
|
March 28, 2016
|
Bank loans to proprietorship
under Priority Sector
|
2.
|
DBOD Mailbox clarification
|
March 17, 2016
|
Eligibility of IBPC as
Priority Sector Asset
|
3.
|
DBOD Mailbox clarification
|
November 27, 2015
|
Bank loans to SHGs/ JLGs-
Processing Charges
|
4.
|
FIDD.CO.Plan.BC.13/04.09.01/2015-16
|
November 18, 2015
|
Priority Sector
Lending-Targets and Classification
|
5.
|
DBOD Mailbox clarification
|
November 3, 2015
|
Overdrafts upto ?5000/- under
PMJDY accounts
|
6.
|
DBOD Mailbox clarification
|
September 7, 2015
|
Calculation of shortfall/
excess
|
7.
|
DBOD Mailbox clarification
|
August 14, 2015
|
Social Infrastructure and Bank
loans to MFIs for on-lending - Social Infrastructure
|
8.
|
FIDD.CO.Plan.BC.08/04.09.01/2015-16
|
July 16, 2015
|
Priority Sector Lending
–Targets and Classification
|
9.
|
DBOD Mailbox clarification
|
June 26, 2015
|
Outstanding deposits with
MUDRA Ltd. on account of priority sector shortfall
|
10.
|
DBOD Mailbox clarification
|
June 12, 2015
|
Loans to Minority Communities
|
11.
|
DBOD Mailbox clarification
|
June 11, 2015
|
Loans to Custom Service Units
|
12.
|
FIDD.CO.Plan.BC.
54/04.09.01/2014-15
|
April 23, 2015
|
Priority Sector
Lending-Targets and Classification
|
Annex
A
Priority
Sector Target Achievement- Calculation of shortfall / excess
Illustrative example:
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.
(Table 1)
|
Amount
in ? thousands
|
Quarter ended
|
PSL targets
|
Priority Sector Amount Outstanding
|
Shortfall / Excess
|
June
|
3296156032
|
3169380800
|
-126775232
|
September
|
3088265369
|
3119459969
|
31194600
|
December
|
3176948703
|
3192913269
|
15964566
|
March
|
3245609908
|
3213475156
|
-32134752
|
Total
|
12806980012
|
12695229194
|
-111750818
|
Average
|
3201745003
|
3173807299
|
-27937704
|
(Table 2)
|
Amount
in ? thousands
|
Quarter ended
|
PSL targets
|
Priority Sector Amount Outstanding
|
Shortfall / Excess
|
June
|
3296156032
|
3279675252
|
-16480780
|
September
|
3088265369
|
3123780421
|
35515052
|
December
|
3176948703
|
3272257164
|
95308461
|
March
|
3245609908
|
3213153809
|
-32456099
|
Total
|
12806980012
|
12888866646
|
81886634
|
Average
|
3201745003
|
3222216661
|
20471658
|
In the example given in Table -
1, the bank has overall shortfall of ? 27937704 thousand at the end of the
financial year. In Table – 2, the bank has overall excess of ? 20471658
thousand at the end of the financial year.
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.
|