Which are priority sector

How this exclusion is to be made? Query 3: Whether the deposits with DFIs viz. What is the method of arriving at the extent of such advances? Clarification: i. The incremental advance is calculated as the difference between outstanding advances in India as on March 7, and the Base Date July 26, In case, the difference in amount of outstanding advances between March 7, and base date is zero or negative, no amount would be eligible for deduction from ANBC for the purpose of arriving at the priority sector lending targets.

If this advance is eligible for priority sector classification, then bank can claim it as PSL. Accordingly, the allocation to RIDF and other funds shall be done on the basis of total shortfall, including the shortfall calculated on incremental credit as per prescribed differential weights.

Query 7: Will the weights be applicable in case of decline in credit or negative incremental credit? Clarification: If there is a decline in credit, the weighted incremental credit will be zero 0. The methodology as given below will be considered for all the districts for which data is reported in ADEPT. The banks are requested to get in touch with our Statistics Division fiddstats rbi. Further, based on the methodology detailed above, banks are expected monitor their own PSL achievement during the year taking into account the prescription of differential weights for credit disbursed in identified districts, for the purpose of trading in PSLCs.

Similar calculations will be done for other PSL targets. Query 9: In case of achieving priority sector through indirect routes viz. How will the incremental credit be calculated in such case?

Clarification: While calculating district-wise incremental credit for assigning weights, the organic credit i. Credit disbursed through the following inorganic routes shall not be considered for incremental weights. Clarification: The PSL guidelines are activity and beneficiary specific and are not based on type of collateral.

Therefore, bank should have extended the loan based on scale of finance and assessment of credit requirement for undertaking the agriculture activity and not solely based on available collateral in the form of gold. Further, as applicable to all loans under PSL, banks should put in place proper internal controls and systems to ensure that the loans extended under priority sector are for approved purposes and the end use is continuously monitored.

Query Can loans given to landless individuals engaged in allied activities be classified under priority sector lending SMF category? Clarification: Bank should ensure proper documentation for classifying agricultural loans under PSL as approved by their board.

Accordingly, all other banks need to declassify the same from PSL. Under the composite criteria, if an enterprise crosses the ceiling limits specified for its present category in either of the two criteria of investment or turnover, it will cease to exist in that category and be placed in the next higher category but no enterprise shall be placed in the lower category unless it goes below the ceiling limits specified for its present category in both the criteria of investment as well as turnover.

Based on the new definition, the earlier criteria regarding continuity of PSL status for three years even after an enterprise grows out of the MSME category concerned, is no longer valid.

Query What is the permissible cap for export credit under priority sector lending? Export Credit other than in agriculture and MSME is classified as priority sector as per the following table:. Query While calculating cap on Export Credit, whether it can be averaged over four quarters of a financial year? For the purpose of computation of achievement of the sub-target, Small and Marginal Farmers will include the following:. Landless agricultural labourers, tenant farmers, oral lessees and share-croppers whose share of landholding is within the limits prescribed for SMFs.

UCBs are not permitted to lend to co-operatives of farmers. Further, such MSMEs should be engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries Development and Regulation Act, or engaged in providing or rendering of any service or services. All bank loans to MSMEs conforming to the above guidelines qualify for classification under priority sector lending.

In terms of paragraph 9 of Circular DBR. All loans to units in the KVI sector will be eligible for classification under the sub-target of 7. Loans to entities involved in assisting the decentralized sector in the supply of inputs and marketing of output of artisans, village and cottage industries. Loans to co-operatives of producers in the decentralized sector viz.

Export Credit other than in agriculture and MSME will be allowed to be classified as priority sector as per the following table:. Loans currently classified as priority sector will continue till maturity. Since Housing loans which are backed by long term bonds are exempted from ANBC, banks should not classify such loans under priority sector. Bank loans to social infrastructure sector as per limits prescribed below are eligible for priority sector classification.

In case of UCBs, the above limits are applicable only in centres having a population of less than one lakh. The following loans as per the prescribed limits are eligible for priority sector classification:. The 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 issued vide circular DBOD.

The investments in securitised assets originated by MFIs, which comply with the guidelines in Paragraph 21 of these Master Directions are exempted from this interest cap as there are separate caps on margin and interest rate for MFIs.

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 issued vide circular DBOD. The outstanding PSLCs bought by banks will be eligible for classification under respective categories of priority sector provided the underlying assets 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.

SFBs may further be guided by the terms and conditions specified in Para 1. The above dispensation shall be valid up to March 31, Bank credit to registered NBFCs other than MFIs for on-lending will be eligible for classification as priority sector under respective categories subject to the following conditions:.

The above dispensation shall be valid upto March Banks should maintain necessary borrower-wise details of the underlying portfolio. Banks shall compute the eligible portfolio under on-lending mechanism by averaging across four quarters, to determine adherence to the prescribed cap. Detailed guidelines, in this regard, have been issued vide our circular FIDD. For the sake of business continuity and to ensure uninterrupted flow of credit to the priority sector, banks may continue existing arrangement as per earlier guidelines on co-origination, issued vide our circular No.

These loans will continue to be classified under priority sector till repayment or maturity, whichever is earlier. Banks may deliver these loans to borrowers directly or through intermediary financial entities regulated by the RBI. Banks desirous of deploying their own resources without availing funds from the RBI under the scheme for lending to the specified segments mentioned above will also be eligible for the incentives stipulated as above. Banks desirous of deploying their own resources without availing funds from the RBI under the scheme for lending to the specified segments mentioned above will also be eligible for this incentive.

The data on priority sector advances is required to be furnished by banks to FIDD, Central Office at quarterly and annual intervals as per the reporting format quarterly and annual. The same method will be followed for calculating the achievement of priority sector sub-targets. Illustration given in Annex IV.

Banks should comply with the following common guidelines for all categories of advances under the priority sector. Issue of acknowledgement of loan applications: Banks should provide acknowledgement for loan applications received under priority sector loans.

Mutual Fund Investments. GST Software. TaxCloud Direct Tax Software. Need Help? About us. Download link sent. Category Personal Finance. Introduction to Priority Sector Lending PSL The Reserve Bank of India decides to allot funds to predetermined priority sectors of the economy that may require credit and financial assistance, especially in cases where the lack of PSL will lead to the heavy losses to the participants of that sector in some cases.

Understanding Priority Sector Lending PSL The goal of a PSL initiative is to provide credit to the weaker sections of the society, as opposed to funding only profitable sectors or spaces that are solely important to economic growth.