RBI revises priority sector lending norms for RRBs

The Reserve Bank of India (RBI) on Thursday revised the priority sector lending target for regional rural banks (RRBs) to 75% of total outstanding loans from 60% earlier, effective January 2016.

In a statement, the central bank said that during the last decade, RRBs have undergone significant structural and operational changes, be it two-phased amalgamation, implementation of CBS platform or recapitalisation. “Considering the growing significance of RRBs in pursuit of financial inclusion agenda, it has been decided to revise the priority sector guidelines for RRBs,” it explained.

Categories of the priority sector include, medium enterprises, social infrastructure and renewable energy, with a cap of 15% of total outstanding. Agriculture should constitute 18% of total outstanding; target of 8% of total outstanding for small and marginal farmers within agriculture.

“The priority sector loans sanctioned under the guidelines issued prior to this date will continue to be classified under priority sector till repayment/maturity/renewal,” RBI said.

Within agriculture, three categories are eligible for priority sector lending. Farm credit comprises loans to individual farmers, including self-help groups (SHGs) directly engaged in agriculture and allied activities. Agriculture infrastructure comprises loans for construction of storage facilities (warehouses, market yards, godowns and silos), including cold storage units designed to store agriculture produce among others.

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 are eligible for priority sector loans.

The central bank said that data on priority sector advances has to be furnished by RRBs to Nabard at quarterly and annual intervals. “For the purpose of calculation of priority sector lending targets, total outstanding will be calculated as on corresponding date of the previous year,” it added.