There are some sectors of the economy, which may face difficulty in getting timely and adequate credit. To facilitate these sectors easy and timely credit, Reserve Bank of India (RBI) has directed banks to provide a specified portion of their lending should be priority sector lending, i.e., lending to few specific sectors, such as agriculture, micro and small enterprises, poor people for housing, students for education and other low income groups and weaker sections.
Loans under following categories are covered under priority sector lending:
- Micro, Small and Medium Enterprises
- Export Credit
- Social Infrastructure
- Renewable Energy
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Targets /Sub-targets for Priority sector Lending
The targets and sub-targets set under priority sector lending for all scheduled commercial banks operating in India are as under:
Domestic scheduled commercial banks and Foreign banks with 20 branches and above:
Total Priority Sector : 40 percent [#] [*]
Agriculture: 18 percent 40 percent [#] [*]
Within the 18 percent target for agriculture, a target of 8 percent for Small and Marginal Farmers.
For Foreign banks with 20 branches and above, the sub-target for Small and Marginal farmers would be made applicable post 2018 after a review in 2017.
Micro Enterprises: 7.5 percent [#]
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.
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 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.
The Total Priority Sector target of 40 percent for foreign banks with less than 20 branches has to be achieved in a phased manner by FY 2019-20.
Activities, lending for which forms part of priority sector lending:
The activities covered under Agriculture are classified under three sub-categories viz. Farm credit, Agriculture infrastructure and Ancillary activities.
- Micro Small and Medium Enterprises
Bank loans up to ₹ 5 crore per unit to Micro and Small Enterprises and ₹ 10 crore to Medium Enterprises
- Export Credit
Sanctioned limit of up to ₹ 25 crore per borrower to units having turnover of up to ₹ 100 crore.
- Education Loan
Loans to individuals for educational purposes including vocational courses upto ₹ 10 lakh
- Housing Loan
- Loans to individuals up to Rs.28 lakh in metropolitan centres and up to Rs.20 lakh in other centres (cos to hosue not exceeding Rs.35 lakh and Rs.25 lakh).
- Loans for repairs up to Rs.5 lakh in metropolitan centres and Rs.₹ 2 lakh in other centres.
- Loans to government agency for construction of dwelling units subject to a ceiling of Rs.10 lakh per dwelling unit.
- Loan for housing projects for construction of houses for economically weaker sections (total cost one house not exceeding Rs.10 lakh)
- Loans to Housing Finance Companies (HFCs) for on-lending, subject to an limit of Rs.10 lakh per borrower.
- Social infrastructure
Loans up to Rs.5 crore for building social infrastructure for activities namely schools, health care facilities, drinking water facilities and sanitation facilities.
Bank credit to Micro Finance Institutions (MFIs) extended for on-lending to individuals and to members of SHGs/JLGs for water and sanitation facilities.
- Renewable Energy
Bank loans up to Rs.15 crore for renewable energy (like solar based power generators, biomass based power generators, wind mills, micro-hydel plants etc.). For individual households, the loan limit will be ₹ 10 lakh per borrower.
Loans upto Rs.50,000/- per borrower, 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/-.
Loans to distressed persons not exceeding ₹ 100,000/- per borrower to prepay their debt to non-institutional lenders.
Computation of Adjusted Net Bank Credit (ANBC)
Bank Credit in India
|Bills Rediscounted with RBI and other approved Financial Institutions|
|Net Bank Credit (NBC)*|
|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|
|Eligible amount for exemptions on issuance of long-term bonds for infrastructure and affordable housing.|
|Eligible advances extended in India against the incremental FCNR (B)/NRE deposits, qualifying for exemption from CRR/SLR requirements.|