RBI/2017-18/175
DCBR.BPD (PCB).Cir.No.07/09.09.002/2017-18
May
10, 2018
The Chief Executive Officer
All Primary (Urban) Co-operative Banks
Dear Sir / Madam
Revised guidelines on lending to
Priority Sector for Primary (Urban) Co-operative Banks (UCBs)
Please refer to our circular UBD.CO.BPD.(PCB).MC.No.18/09.09.001/2013-14
dated October 8, 2013 on the captioned subject and amendments
thereto from time to time, consolidated in Master
Circular DCBR.BPD.(PCB).MC.No:11/09.09.001/2015-16 dated July 1, 2015.
The existing guidelines have been reviewed and it has been decided to issue
revised guidelines (as per Annex-I) in
supersession of the guidelines in the above-mentioned Master Circular.
2. Salient features of the
revised guidelines are as under:
i.
Target
for lending to total priority sector and weaker section will continue as 40
per cent and 10 per cent, respectively, of Adjusted Net Bank Credit (ANBC)
or credit equivalent of off-balance sheet exposure, whichever is higher, as
hitherto.
ii.
Agriculture:
Distinction between direct and indirect agriculture is dispensed with.
iii.
Bank
loans to food and agro processing units will form part of Agriculture.
iv.
Medium
Enterprises, Social Infrastructure and Renewable Energy will form part of
priority sector.
v.
A
target of 7.5 per cent of ANBC or credit equivalent of off-balance sheet
exposure, whichever is higher, has been prescribed for Micro Enterprises.
vi.
Education:
Distinction between loans for education in India and abroad is dispensed
with.
vii.
Micro
Credit ceases to be a separate
category under priority sector.
viii.
Loan
limits for housing loans qualifying under priority sector have been
revised.
ix.
Priority
Sector assessment will be monitored through quarterly and annual
statements.
3. The revised guidelines will
be operational with effect from the date of this circular. Priority sector
loans sanctioned under the guidelines issued prior to the date of this
circular will continue to be classified under priority sector till maturity
/ renewal.
4. Achievement of Priority
Sector targets
Achievement of priority sector
targets will be taken into account while granting regulatory clearances /
approvals for various purposes. With effect from April 1, 2018, achievement
of priority sector targets will be included as a criterion for classifying
a UCB as Financially Sound and Well Managed (FSWM), in addition to the
criteria specified in our circulars
UBD.CO.LS.(PCB).Cir.No.20/07.01.000/2014-15 and DCBR.CO.LS.(PCB).Cir.No.4/07.01.000/2014-15 dated
October 13, 2014 and January 28, 2015 respectively. For the financial year
2018-19, shortfall in achieving the priority sector target / sub-target
will be assessed based on the position as on March 31, 2018. From the
financial year 2019-20 onwards, the achievement at the end of the financial
year will be arrived at based on the average of priority sector target /
sub-target achievement as at the end of each quarter. Illustrative example
is given in Annex-II.
Yours faithfully,
(Neeraj Nigam)
Chief General Manager
Encl.: Annex I & II.
ANNEX-I
Priority
Sector Lending – Targets and Classification
I. Categories under Priority
Sector
i.
Agriculture
ii.
Micro,
Small and Medium Enterprises
iii.
Export
Credit
iv.
Education
v.
Housing
vi.
Social
Infrastructure
vii.
Renewable
Energy
viii.
Others
Details of eligible activities
under the above categories are specified in paragraph III.
II. Targets / Sub-targets for
Priority sector
(i) The targets and sub-targets
set under priority sector lending for UCBs are given below. The stipulation
regarding priority sector lending is not applicable to the Salary Earners'
Banks.
Total Priority Sector
|
40 percent of Adjusted Net
Bank Credit [ANBC defined in sub paragraph (ii) below] or credit
equivalent amount of Off-Balance Sheet Exposure, whichever is higher.
|
Total agriculture
|
No target.
|
Micro Enterprises
|
7.5 percent of ANBC or Credit
Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher
|
Advances to Weaker Sections
|
10 percent of ANBC or credit
equivalent amount of Off-Balance Sheet Exposure, whichever is higher.
|
(ii) 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 March 31 of the preceding year. For the purpose of priority
sector lending, ANBC denotes total loans and advances minus bills
rediscounted with RBI and other approved Financial Institutions plus
investments made after August 30, 2007 in permitted non SLR bonds under
Held to Maturity (HTM) category. For the purpose of calculation of credit
equivalent of off-balance sheet exposures, banks may use current exposure
method. Inter-bank exposures including inter-bank off-balance sheet
exposures will not be taken into account for the purpose of priority sector
lending targets / sub-targets.
(iii) Banks should not deduct /
net off any amount like provisions, accrued interest, etc., from ANBC.
(iv) 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 UBD.BPD.(PCB).CIR.No.5/13.01.000/2013-14 dated
August 27, 2013 read with UBD.BPD.(PCB).Cir.No.72/13.01.000/2013-14
dated June 11, 2014 will be excluded from the ANBC for
computation of priority sector lending targets, till their repayment.
III. Description of the eligible
categories under priority sector
1. Agriculture
The present distinction between
direct and indirect agriculture is dispensed with. Instead, the lending to
agriculture sector has been re-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 subcategories is indicated
below:
1.1
|
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], 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 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 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.
|
1.2
|
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.
|
1.3
|
Ancillary activities
|
(i)
|
Loans for setting up of
Agriclinics and Agribusiness Centres.
|
(ii)
|
Loans for Food and
Agro-processing up to an aggregate sanctioned limit of ? 100 crore per
borrower from the banking system.
|
(iii)
|
Loans to Custom Service Units
managed by individuals, institutions or organisations who maintain a
fleet of tractors, bulldozers, well-boring equipment, threshers,
combines, etc., and undertake farm work for farmers on contract basis.
|
Note:
Small and Marginal farmers will
include the following:
·
Farmers
with landholding of up to 1 hectare are considered as Marginal Farmers.
Farmers with a landholding of more than 1 hectare and up to 2 hectares are
considered as Small Farmers.
·
Landless
agricultural labourers, tenant farmers, oral lessees and share-croppers.
2. Micro, Small and Medium
Enterprises (MSMEs)
2.1 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.
2.2 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.
2.3 Service Enterprises
All bank loans to micro, small
and medium enterprises engaged in providing or rendering of services as
defined in terms of investment in equipment under MSMED Act, 2006.
2.4 Khadi and Village Industries
(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.
2.5 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. The term “entities” do not include institutions to which UCBs
are not permitted to lend under RBI guidelines / the legal framework
governing the functioning of these banks.
ii.
Overdrafts
extended by UCBs 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.
2.6 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.
3. Export Credit
The Export Credit extended as
per the details below would be classified as priority sector.
3.1 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 subject to a
sanctioned limit of up to ? 25 crore per borrower to units having turnover
of up to ? 100 crore.
3.2 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.
4. 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.
5. Housing
i.
Loans
to individuals up to ? 28 lakh irrespective of location for purchase/
construction of a dwelling unit per family provided the overall cost of the
dwelling unit should not exceed ? 35 lakh. The housing loans to banks' own
employees will be excluded.
ii.
Loans
for repairs to damaged dwelling units of families up to ? 5 lakh in
metropolitan centres and up to ? 2 lakh in other centres.
iii.
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.
iv.
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.
v.
Assistance
given to a non-governmental agency approved by the NHB for the purpose of
refinance for construction / reconstruction of dwelling units or for slum
clearance and rehabilitation of slum dwellers, subject to a ceiling of loan
component of ? 10 lakh per dwelling unit.
vi.
Investments
made by UCBs in bonds issued by NHB / HUDCO on or after April 1, 2007 shall
not be eligible for classification under priority sector lending.
6. Social infrastructure
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.
7. 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
nonconventional energy based public utilities viz. street lighting systems,
and remote village electrification. For individual households, the loan
limit will be ? 10 lakh per borrower.
8. Others
8.1 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 ? 100,000/- and for non-rural areas it does not
exceed ? 1,60,000/-
8.2 Loans to distressed persons
[other than farmers already included under III (1.1) A (v)] not exceeding ?
100,000/- per borrower to prepay their debt to non-institutional lenders.
8.3 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.
IV. Weaker Sections
Priority sector loans to the
following borrowers will be considered under Weaker Sections category:
No.
|
Category
|
1
|
Small and Marginal Farmers
|
2
|
Artisans, village and cottage
industries where individual credit limits do not exceed ? 1 lakh
|
3
|
Scheduled Castes and Scheduled
Tribes
|
4
|
Self Help Groups
|
5
|
Distressed farmers indebted to
non-institutional lenders
|
6
|
Distressed persons other than
farmers, with loan amount not exceeding ? 1 lakh per borrower to prepay
their debt to non-institutional lenders
|
7
|
Women
|
8
|
Persons with disabilities
|
9
|
Overdrafts upto ? 5,000/-
under Pradhan Mantri Jan-Dhan Yojana (PMJDY) accounts, provided the
borrowers' household annual income does not exceed ? 100,000/- for rural
areas and ? 1,60,000/- for non-rural areas
|
10
|
Minority communities as may be
notified by Government of India from time to time
|
Note: In States, where one of
the minority communities notified is, in fact, in majority, item (10)
will cover only the other notified minorities. These States / Union
Territories are Jammu & Kashmir, Punjab, Meghalaya, Mizoram, Nagaland
and Lakshadweep.
|
V. Priority Sector Lending
Certificates
The outstanding priority sector
lending certificates bought by the banks will be eligible for
classification under respective categories of priority sector provided the
assets are originated by banks, and 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.
VI. Monitoring of Priority
Sector Lending targets
To ensure continuous flow of
credit to priority sector, there will be more frequent monitoring of
priority sector lending compliance of UCBs on ‘quarterly’ basis instead of
annual basis as of now. The data on priority sector advances shall be
furnished by UCBs at quarterly and annual intervals as per revised
reporting formats Statement I and Statement II (Part A to E) to the concerned
Regional Office of the Reserve Bank. The reports should reach the Regional
Office within a period of 15 days from the end of the period to which they
relate.
VII. Common guidelines for
priority sector loans
Banks should comply with the
following common guidelines for all categories of advances under the
priority sector.
1. 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.
2. 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.
3. Issue of Acknowledgement of
Loan Applications
UCBs 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.
ANNEX-II
Priority
Sector Target Achievement - Calculation of shortfall / excess
Illustrative example:
Tables 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
|
3,29,61,56,032
|
3,16,93,80,800
|
-12,67,75,232
|
September
|
3,08,82,65,369
|
3,11,94,59,969
|
3,11,94,600
|
December
|
3,17,69,48,703
|
3,19,29,13,269
|
1,59,64,566
|
March
|
3,24,56,09,908
|
3,21,34,75,156
|
-3,21,34,752
|
Total
|
12,80,69,80,012
|
12,69,52,29,194
|
-11,17,50,818
|
Average
|
3,20,17,45,003
|
3,17,38,07,299
|
-2,79,37,704
|
(Table
2)
|
Amount
in ? thousands
|
Quarter
ended
|
PSL
targets
|
Priority
Sector Amount Outstanding
|
Shortfall
/ Excess
|
June
|
3,29,61,56,032
|
3,27,96,75,252
|
-164,80,780
|
September
|
3,08,82,65,369
|
3,12,37,80,421
|
3,55,15,052
|
December
|
3,17,69,48,703
|
3,27,22,57,164
|
9,53,08,461
|
March
|
3,24,56,09,908
|
3,21,31,53,809
|
-3,24,56,099
|
Total
|
12,80,69,80,012
|
12,88,88,66,646
|
8,18,86,634
|
Average
|
3,20,17,45,003
|
3,22,22,16,661
|
2,04,71,658
|
In the example given in Table - 1, the bank has average shortfall of ?
2,79,37,704 thousand at the end of the financial year. In Table - 2, the bank has average excess of ?
2,04,71,658 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.
|