Priority Sector Advances (RBI)

Priority Sector Lending Norms in India

1. Prepared by,
Abinash Kr. Mandilwar
Chief Manager & Faculty Member
BOI Staff Training College, Bhopal

2. 1968-1972
•National Credit Council held in 1968
•Description of Priority Sector formalized in 1972
1974-1979
•Initially no specific targets for PSAs
•In1974itwasdecidedthatshareofPSAsshouldincrease
to331/3%oftotaladvancesbyMarch1979
1980-2006
•MeetingofUnionFinanceMinisterwithchiefofPSBs,it
wasagreedtoraisetheshareofPSAsto40%ofTotal
AdvancesbyMarch1985.
2007-2012
•The guidelines were revised in the year 2007.
•On recommendation of the M V Nair Committee, revised
guideline was effect from July 20, 2012.
23/4/2015
•On recommendation of Internal Working Group (IWG),
RBI has revised the existing Priority Sector Lending
guidelines w.e.f. 23/04/2015

3. •40%ofANBCorCreditequivalent
amountofOff-BalanceSheet
exposure,Whicheverishigher
Domestic commercial
Banks / Foreign Banks
with 20 & above
branches
•40%ofANBCorCreditequivalentamount
ofOff-BalanceSheetexposure,
Whicheverishigher,tobeachievedin
phasedmannerby2020
Foreign Banks with
less than 20
branches
•Targethastoachievedwithina
maximumperiodof5yearsstarting
from01Aril2013to31March2018
Foreign Banks with
20 & above
branches
•75%oftotaloutstanding
Advancesw.e.f.1
st
Jan2016
Regional Rural
Bank
TARGETS UNDER PRIORITY SECTOR ADVANCES

4. PRIORITY
SECTOR
ADVANCE
Agriculture
MSME
Education
Loans
Export credit
Housing
Social
Infrastructure
Renewable
Energy
Others

5. Adjusted Net Bank Credit (ANBC)
Bank Credit in India (As prescribed initem No. VI of Form ‘A’as on 31
st
March) under Sec 42 [2] of RBI Act, 1934
I
Bills rediscounted with RBIand other approved Financial institutionsII
NetBank Credit(NBC) III (I-II)
Investment in non-SLR bonds in HTM category +Other investments eligible
to be treated as PSAs + O/s Deposits under RIDF, other eligible funds with
NABARD, NHBand SIDBI on a/c of PSA shortfall + o/s PSLCs
IV
Eligible amount for exemptions on issuance of long term bands for
infrastructure and affordable housing as per circular DBOD.BP.BC.No.
25/08.12.014/2014-15 datedJuly 15, 2014
V
Eligible advance extendedin India against the incremental FCNR(B)/NRE
deposits, qualifying for exemption from CRR/SLR requirements.
VI
Adjustednet Bank Credit (ANBC) III+IV-V-VI
Off–Balance Sheet Exposures:-An asset or Debt that does not appear
on a bank’s balance sheet. Such as: LC, BG, Forward contract etc.
ANBC & OFF-BALANCE SHEET EXPOSURE

6. The total priority sector target of 40% for
foreign bank with less than 20 branches has to
be achieved in a phased manner as under.
Financial yearThe total priority sectorpercentage 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

7. TARGETS UNDER AGRICULTURE
DomesticcommercialBanks/Foreign
Bankswith20&abovebranches:-
18%ofANBCorOff-BalanceSheet
exposure,Whicheverishigher.
Withinthe18%targetofagriculture,
targetof8%isprescribedforSmall&
MarginalFarmer.
ForeignBankswithlessthan20
branches:-Nospecifictarget.

8. Computationof8%loantosmallandmarginalfarmers
includethefollowing:
MarginalFarmer:FarmerLandholdingupto1hectare,
SmallFarmer:FarmerLandholdingupto2hectare,
Landlessagriculturallabourers,tenantfarmers,oral
lesseesandshare-croppers,
LoantoSHGorJLGengagedinagricultureandallied
activities,
Loantofarmerproducercompaniesofindividual
farmersandco-operativesocietyhaving75%Small
andMarginalfarmerengagedinagricultureactivities.
SMALL & MARGINAL FARMERS

9. FarmCreditLoanstoindividualfarmers,SHG,JLG:
Shorttermloanforraisingcrops,i.e.CropLoans.
Medium&longtermloantofarmersforagriculture&
alliedactivities.
Loantofarmersforpre&postharvestactivities.
Loantofarmersupto50lakhagainstagricultureproduce
(includingwarehousereceipt)for12months.
LoanstofarmersunderKCCScheme.
Loanstodistressfarmersindebtedtononinstitutional
lenders.
Loantosmall&marginalfarmerstopurchaseoflandfor
agriculturepurpose.
AGRICULTURE ADVANCE

10. FarmCreditLoantocorporatefarmer,farmerproducer
organization,Partnershipforms,Cooperativesocieties
engagedinAgricultureandAlliedactivitiesforLoans
limitupto2croreperborrower.Thiswillinclude:
CropLoanstofarmerwhichwillincludetraditional/
Non-traditionalplantationsandhorticulture,andloans
toalliedactivities.
Medium&longtermloantofarmersforagriculture&
alliedactivities.
Loantofarmersforpre&postharvestactivities.
Loantofarmersupto50lakhsagainstagriculture
produce(includingwarehousereceipt)for12months.
AGRICULTURE ADVANCE

11. LoanforaggregatesanctionlimitofRs.100crore
perborrowerfromthebankingsystem.
Loansforconstructionofstoragefacilities
(Warehouse,Godowns,marketyards)including
coldstorageunitsdesignedtostoreAgriculture
produce,irrespectiveoftheirlocation.
Soilconservationandwatersheddevelopment
Planttissuecultureandagri-biotechnology,
seedproduction,productionofbio-pesticides,
bio-fertilizer,andvermicomposting.
AGRICULTURE INFRASTRUCTURE

12. LoansuptoRs.5croretoco-operativesocietiesoffarmers
fordisposingoftheproduceoffarmers.
LoansforsettingAgriclinic&Agribusinesscentre.
LoansanctiontoMFIsforonlendingAgactivities.
LoansforFood&Agro-processinguptoanaggregate
sanctionlimitofRs.100croreperborrowerfromthe
bankingsystem.
BankloanstoPrimaryAgriculturalCooperative
Society(PACS),Farmer’sServiceSocieties(FSS)andLarge
sizedAdivasiMultiPurposeScheme(LAMPS)foron
lendingtoAgriculture.
OutstandingdepositsunderRIDFandeligiblefundswith
NABRDonaccountofprioritysectorshortfall.
AGRICULTURE ANCILLARY ACTIVITIES

13. MICRO, SMALL & MEDIUM ENTERPRISES
DomesticcommercialBanks/ForeignBankswith20&above
branches:-AllBankloantoMicro,Small&MediumEnterprisesboth
manufacturingandservicesareeligibletoclassifiedunderPriority
SectorAdvances.
MicroEnterprises:7.5percentofANBCorCreditEquivalentAmount
ofOff-BalanceSheetExposure,whicheverishigher.
ManufacturingEnterprises:TheMicro,Small&MediumEnterprises
engagedinthemanufactureorproductionofgoodstoanyindustry.
ServiceEnterprises:AllBankloantoMicroandSmallEnterprises
engagedinprovidingorrenderingofservicesintermsofinvestment
anddefinedunderMSMEDActshallqualifyunderprioritysectors
withoutanycreditcap.
ForeignBankswithlessthan20branches:-Nospecifictarget.

14. KhadiandVillageIndustriesSector(KVI):Allloangiventounits
ofKVIsectorwilleligibleforclassificationof7.5%prescribed
toMicroEnterprises.
OtherfinancetoMSMEs:
LoanstopersoninvolveinassistingtheArtisans,Cottage
Industry.
LoantocooperativeofproducersintheArtisans,Cottage
Industry.
LoansanctiontoBanks,MFIsforonlendingtoMSEsectors.
CreditoutstandingunderallGeneralCreditCards.
OutstandingdepositswithSIDBIonaccountofprioritysector
shortfall.
MICRO, SMALL & MEDIUM ENTERPRISES

15. TARGETS UNDER EXPORT CREDIT
DomesticcommercialBanks:Incrementalexportcreditover
correspondingdateofprecedingyear,upto2%ofANBCor
Off-BalanceSheetexposure,whicheverishigher,effective
fromApril1,2015subjecttosanctionlimitofRs.25croreper
borrowertounithavingturnoverofuptoRs.100crore.
ForeignBankswith20&abovebranches:-:Incremental
exportcreditovercorrespondingdateofprecedingyear,upto
2%ofANBCorOff-BalanceSheetexposure,whicheveris
higher,effectivefromApril1,2017.
ForeignBankswithlessthan20branches:-ExportCreditwill
beallowedupto32%ofANBCorOff-BalanceSheet
exposure,whicheverishigher.

16. Weaker Section:-10% of ANBC or Credit equivalent amt of Off-Balance Sheet
exposure, Whichever is higher. Foreign branch having 20 branch and
above have to achieve by 31 March 2018.
Loan to Small and Marginal farmers,
Beneficiaries of NRLM, NULM, SRMS, SHG & DRI Scheme,
Artisans, Village and cottage industries where individual credit limits do not
exceed Rs1 lac,
Loan to individual SC & ST category ,
Loan to persons with disabilities,
Loans to individual women beneficiaries up to Rs1 lac per borrower etc,
Loans to distressed farmers indebted to non-institutional lenders,
Loans to distressed persons other than farmers not exceeding Rs. 1 lac per
borrower to prepay their debt to non-institutional lenders,
OD up to Rs. 5000 under PMJDY having annual income 1 lac in rural and 1.60 lac
non rural areas.
Minority communities as may be notified by Government of India from time to
time.
WEAKER SECTION

17. EducationloanRs.10lakhtoindividual
includingvocationalcourseirrespectiveof
sanctionamount.
LoanlimitofRs.5croreperborrower
forbuildingsocialinfrastructurenamely
school,healthcarefacilities,drinking
water,andsanitationinTierIItoTierVI
centers.
EDUCATION LOAN &
SOCIAL INFRASTRUCTURE

18. LoansuptolimitofRs.15croreto
borrowersforpurposelikesolarbased
powergeneration,biomassbasedpower
generators,windmills,micro-hydelplants
andfornonconventionalenergybased
publicutilitiesviz.streetlightingsystems,
andremotevillageelectrification.For
individualhouseholds,theloanlimitwillbe
Rs.10lakhperborrower.
RENEWABLE ENERGY

19. HOUSING LOAN
ForPurchase/Construction:Metro(Population10lakh)Rs.35lakh&othercentres
Rs.25lakhprovidedoverallcostnotexceedRs.45lakh&Rs.30lakhrespectively
ForRepair/Renovation:MetroRs.5lakhandothercentreRs.2lakh.
HousingFinanceCompanies(HFCs),approvedbyNHBforon-lendingforthe
purposeofpurchase/constructionofindividualdwellingunitsorforslumclearance
andrehabilitationofslumdwellers,subjecttoanaggregateloanlimitofRs.10lakh
perborrower.TheeligibilityunderprioritysectorloanstoHFCsisrestrictedtofive
percentoftheindividualbank’stotalprioritysectorlending,onanongoingbasis.
AssistancegiventoanyGovt.agencyforconstructionofdwellingunitsorforslum
clearanceandrehabilitationofslumdwellerssubjecttoceilingofRs.10lakhper
dwellingunits.
Forconstructionofhousestoeconomicallyweakersections&lowincomegroups,
thetotalcostofwhichdonotexceedRs.10lakhperdwellingunit.Foreconomically
weakersectionsandlowincomegroups,thefamilyincomelimitofRs.2lakhper
annumirrespectiveofthelocation.

20. Loans up to Rs. 50,000/-per borrower provided directly by banks
to individuals and their SHG/JLG provided the borrower’s
household annual income in rural areas not exceeding Rs.
100,000/-and for non-rural areas not exceeding Rs.1,60,000/-.
Loans sanction to State Sponsored organization for SC/ST for
specific purpose of purchase and supply of inputs .
Loans sanctioned to distressed person not exceeding Rs. 100,000/-per
borrower to prepay their debt to non-institutional lenders.
Overdrafts, up to Rs. 5,000 /-per a/c, granted PMJDY accounts
provided the borrowers household annual income in rural areas does
not exceed Rs. 100,000 and for non rural areas it should not exceed Rs.
1,60,000/-.
OTHERS

21. Allscheduledcommercialbankshavingshortfallin
lendingtoprioritysectortarget/subshallbeallocated
amountsforcontributiontoruralInfrastructure
DevelopmentFund(RIDF)establishedwithNABARD
andotherFundswithNABARD/NHB/SIDBI/other
FinancialInstitutionsasdecidedbytheRBIfromtime
totime.
Non-Achievementofprioritysectortargetsandsub-
targetswillbetakenintoaccountwhilegranting
regulatoryclearances/approvalsforvariouspurposes.
NON-ACHIEVEMENT OF PRIORITY
SECTOR TARGETS