PRIORITY SECTOR LENDING Priority Sector lending includes lending to those sectors that impact large sections of the

population, the weaker sections and the sectors which are employment-intensive such as agriculture, and tiny and small enterprises. The categories under priority sector include agriculture, micro & small enterprises, education, housing, export credit, and others. CATEGORIES OF PRIORITY SECTOR
(A) Agriculture (Direct Finance)

Direct inance to agriculture includes short term and long term loans given for agriculture and allied activities !dairy, fishery, piggery, poultry, "ee-keeping, etc.# directly to individual farmers, Self $elp %roups !S$%s# or &oint 'ia"ility %roups !&'%s# of individual farmers without limit and to others !such as corporate, partnership firms, and institutions# upto certain limits for taking up agriculture(allied activities. Direct finance includes)

Short-term loans for raising crops, i.e. for crop loans including traditional( non-traditional plantations and horticulture. *edium & 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 development loans for allied activities#. 'oans to farmers for pre and post-harvest activities, vi+., spraying, weeding, harvesting, sorting, grading and transporting of their own farm produce. ,dvances up to -s. ./ 'akh against pledge(hypothecation of agricultural produce !including warehouse receipts# for a period not exceeding 01 months, irrespective of whether the farmers were given crop loans for raising the produce or not. 2ank loans to Primary ,gricultural 3redit Societies !P,3S#, armers4 Service Societies ! SS# and 'arge-si+ed ,divasi *ulti Purpose Societies !',*PS# ceded to or managed( controlled "y such "anks for on lending to farmers for agricultural and allied activities. 'oans to small and marginal farmers for purchase of land for agricultural purposes. 'oans to distressed farmers inde"ted to non-institutional lenders, against appropriate collateral or group security. 5xport credit to farmers for exporting their own farm produce. 'oans to farmers under 6isan 3redit 3ard Scheme

Finance to others !corporate, partnership firms and institutions# 'oans to corporate including farmers7 producer companies of individual farmers, partnership firms and co-operatives of farmers directly engaged in ,griculture and ,llied ,ctivities, vi+., dairy, fishery, animal hus"andry, poultry, "ee-keeping and sericulture !up to cocoon stage# up to an aggregate li it o! " crore #er $orro%er for the following purposes.

Short-term loans for raising crops, i.e. for crop loans. This will include traditional(non-traditional plantations, horticulture and allied activities. *edium & long-term loans for agriculture and allied activities !e.g. purchase of
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agricultural implements and machinery, loans for irrigation and other developmental activities undertaken in the farm, and development loans for allied activities#. 'oans for pre-harvest and post-harvest activities, vi+., spraying, weeding, harvesting, grading and sorting. 5xport credit for exporting their own farm produce. 'oans to farmers for pre and post-harvest activities, vi+., spraying, weeding, harvesting, grading and sorting.

Agriculture (In&irect Finance) inance for ,griculture and ,llied ,ctivities granted to corporate, partnership firms and institutions engaged in agriculture and allied activities !dairy, fishery, animal hus"andry, poultry, "ee-keeping and sericulture !up to cocoon stage#.

The aggregate loan li it #er $orro%er ore than Rs' " crore in respect of "orrowers under inance to others listed under direct finance. 'oans up to -s. ./ 'akh against pledge(hypothecation of agricultural produce !including warehouse receipts# for a period not exceeding 01 months, irrespective of whether the farmers were given crop loans for raising the produce or not. 2ank loans to Primary ,gricultural 3redit Societies !P,3S#, armers4 Service Societies ! SS# and 'arge-si+ed ,divasi *ulti Purpose Societies !',*PS# other than those covered under direct finance to agriculture.

Other In&irect Finance includes)

'oans up to -s.. crore per "orrower to dealers (sellers of fertili+ers, pesticides, seeds, cattle feed, poultry feed, agricultural implements and other inputs. 'oans for setting up of ,griclinics and ,gri"usiness 3entres. 'oans up to -s. . crore to cooperative societies of farmers for disposing of the produce of mem"ers. 'oans to 3ustom Service 8nits managed "y individuals, institutions or organi+ations who maintain a fleet of tractors, "ulldo+ers, well-"oring e9uipment, threshers, com"ines, etc., and undertake farm work for farmers on contract "asis. 'oans for construction and running of storage facilities !warehouse, market yards, godowns and silos#, including cold storage units designed to store agriculture produce(products, irrespective of their location. !:f the storage unit is a micro or small enterprise, such loans will "e classified under loans to *S5 sector#. 'oans to * :s for on-lending to farmers for agricultural and allied activities as per the conditions specified in paragraph ;::: of this circular. 'oans sanctioned to <%=s, which are S$% Promoting :nstitutions, for on-lending to mem"ers of S$%s under S$%-2ank 'inkage Programme for agricultural and allied activities. 'oans sanctioned to --2s for on-lending to agriculture and allied activities.

(A) (icro ) S all Enter#rises * Direct finance to *S5 includes)2

i)

*anufacturing 5nterprises

!a# *icro !manufacturing# 5nterprises 5nterprises engaged in the manufacture(production, processing or preservation of goods and whose original cost of investment in plant and machinery !excl. land & "uilding and other items as per *S*5D ,ct 1//># does not exceed -s. 1. 'akh, irrespective of the location of the unit. !"# Small !manufacturing# 5nterprises 5nterprises engaged in the manufacture(production, processing or preservation of goods and whose original cost of investment in plant and machinery !excl. land and "uilding and other items as per the ,ct# is more than -s. 1. 'akh "ut does not exceed -s. . crore, irrespective of the location of the unit.
ii) Service 5nterprises

(a) (icro (Ser+ice) Enter#rises 5nterprises engaged in providing(rendering of services and whose original cost of investment in e9uipment !excl. land and "uilding and furniture, fittings and other items not directly related to the service rendered# does not e,cee& Rs' -. La/h, irrespective of the location of the unit. ($) S all (ser+ice) Enter#rises 5nterprises engaged in providing(rendering of services and whose original cost of investment in e9uipment !excl. land and "uilding and furniture, fittings and such items# is ore than Rs' -. La/h $ut &o not e,cee& Rs' " crore , irrespective of the location of the unit. $) Other acti+ities 'oans for food and agro processing will "e classified under *icro and Small 5nterprises, provided the units satisfy investments criteria prescri"ed for *icro and Small 5nterprises, as provided in *S*5D ,ct, 1//>. The small and micro !service# enterprises also include small road & water transport operators, small "usiness, professional & self-employed persons, and other service enterprises engaged in activities as listed in the ,ct and satisfy the investment in e9uipment criteria i.e. not e,cee&ing Rs' -. La/h an& Rs' " crore res#ecti+el0 . inance granted "y commercial "anks to *S5 sector !"oth mfg. and services# which satisfy the definition of *S*5D ,ct 1//> are eligi"le for "eing classified un&er #riorit0 sector len&ing. 2ank loans to *icro and Small 5nterprises !*S5# engaged in providing or rendering of services will "e eligi"le for classification as direct finance to *S5 Sector under priority sector up to an aggregate loan li it o! 1 crore #er $orro%er2unit3 provided they satisfy the investment criteria for e9uipment as defined under *S*5D ,ct, 1//>. 5xport credit to *S5 units !"oth *fg. and Services# for exporting of goods(services produced(rendered "y them.
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,ll advances granted to 6hadi & ;illage :ndustries !6;:# sector irrespective of their original investment in plant & machinery are also eligi"le for consideration under su"target !>/?# of *S5 segment within the priority sector.

In&irect !inance to *S5 !mfg. as well as service# sector includes: Persons involved in assisting the decentralised sector in the supply of inputs to and marketing of outputs of artisans, village and cottage industries. ,dvances to cooperatives of producers in the decentralised sector vi+. artisans village and cottage industries. 'oans granted "y "anks to *icro inance :nstitutions on or after, ,pril 0, 1/00 for onlending to micro and small enterprises !manufacturing as well as services# are eligi"le for priority sector status su"@ect to the compliance of other guidelines. (C) (icro Cre&it 'oans of very small amounts, not exceeding -s../,/// per "orrower provided directly "y "anks either to "orrowers or indirectly through a S$%(&'% mechanism provided the "orrower4s household annual income in rural areas does not exceed -s. >/,///(- and -s. 01/,///(- in non-rural areas. 'oans outstanding under loans for general purposes under %eneral 3redit 3ards !%33#. :f the loans under %33 are sanctioned to *icro and Small 5nterprises, such loans should "e classified under respective categories of *icro and Small 5nterprises. =verdrafts, up to ./,/// !per account#, granted against "asic "anking ( savings accounts provided the "orrowers household annual income in rural areas does not exceed .>/,///(- and for non-rural areas it should not exceed 0,1/,///(-. 'oans sanctioned "y "anks directly to individuals for setting up off-grid solar and other off-grid renewa"le energy solutions for households. (D) State s#onsore& organi4ation !or SC2ST ,dvances sanctioned to State Sponsored =rganisations for Scheduled 3astes( Scheduled Tri"es for the specific purpose of purchase and supply of inputs to and(or the marketing of the outputs of the "eneficiaries of these organisations. (E) E&ucation 'oans granted to individuals for educational purposes including vocational courses up to Rs' -. la/h !or stu&ies in In&ia an& Rs' ". la/h !or stu&ies a$roa& . 'oans granted to educational institutions which 9ualify under *S*5D ,ct 1//> are eligi"le to "e classified under priority sector under *S5 !services# provided they 9ualify under *S*5D ,ct 1//>. (F) 5ousing 'oans up to Rs' "1 La/h in metropolitan centres with #o#ulation a$o+e -. La/h and Rs' -1 La/h in other centres to individuals for purchase(construction of a dwelling unit per family, excluding loans granted "y "anks to their own employees, w.e.f. /0./A.1/00 !upto *arch 1/00 the limit would "e -s. 1/ 'akh#. 'oans given for repairs to the damaged dwelling units of families u# to Rs' " La/h in rural an& se i6ur$an areas an& u# to Rs' 1 La/h in ur$an an& etro#olitan areas .
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,ssistance given to any governmental agency for construction of dwelling units or for slum clearance and reha"ilitation of slum dwellers, su"@ect to a ceiling of Rs' -. La/h of loan amount per dwelling unit. ,ssistance given to a non-governmental agency($ 3s approved "y the <$2 for the purpose of refinance(on lending for purchase(construction(reconstruction of dwelling units or for slum clearance and reha"ilitation of slum dwellers, su"@ect to a ceiling of loan component of Rs' -. La/h #er &%elling unit. !8pto 1A./A.1/01 the ceiling would "e -s. . 'akh# The eligi"ility under priority sector loans to $ 3s is restricted to !i+e #ercent of the individual "ank4s total priority sector lending, on an ongoing "asis. The maturity of "ank loans should "e co-terminus with average maturity of loans extended "y $ 3s 'oans sanctioned "y "anks for housing pro@ects exclusively for the purpose of construction of houses only to econo icall0 %ea/er sections an& lo% inco e grou#s, the total cost of which does not e,cee& -. la/h #er &%elling unit3 will 9ualify for priority sector status. or the purpose of identifying the economically weaker sections and low income groups, the family income limit of Rs'-3".3... #er annu , irrespective of location, is prescri"ed.

) includes ) Small and marginal farmers with land holding of . acres and less, and landless la"ourers, tenant farmers and share croppersB ,rtisans, village and cottage industries where individual credit limits do not exceed -s. ./,/// and "eneficiaries of <ational -ural 'ivelihood *ission !<-'*#. S3 and ST and D-: "eneficiaries. 2eneficiaries under Swarna &ayanti Shahari -o+gar Co@ana !S&S-C# and Scheme for -eha"ilitation of *anual Scavengers !S-*S#B ,dvances to Self $elp %roups and distressed poor to prepay their de"t to informal sector. 'oans to distressed poor to repay their de"t to informal sector against appropriate collateral or group security. 'oans granted under !a# to !i# a"ove to persons from minority communities as may "e notified "y %overnment of :ndia from time to time.
(H) E,#ort cre&it applica"le for "oth domestic and foreign "anks !less than 1/ "ranches# as

(G) 7ea/er Sections

per the revised target mentioned. Other Gui&elines* !ollo%ing %ill also $e eligi$le to $e classi!ie& as #riorit0 sector :nvestments "y "anks in securitised assets of other "anks and financial institutions, representing loans to various categories of priority sector, provided original loans fulfill the -eserve 2ank of :ndia guidelines on securitisation. =utright purchases of any loan provided the loans purchased are eligi"le to "e categori+ed under priority sectorB :nvestments in eligi"le assets "y "anks in :nter 2ank Participation 3ertificates !:2P3s#, on a risk sharing "asis, and are held for at least 0D/ days from the date of investment are also eligi"le. Targets ) Su$6targets
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The targets and su"-targets set under priority sector lending for domestic and foreign "anks operating in :ndia are given hereunder. or foreign "anks with 1/ and a"ove "ranches, the targets have to "e achieved within a maximum period of five years starting from /0./A.0E and ending on E0./E.0D. The foreign "anks have to su"mit their action plan latest "y E0.01.01 for approval "y -2:. Para eter Do estic co ercial Foreign $an/s %ith less $an/s2Foreign $an/s %ith ". than ". $ranches an& a$o+e $ranches Total Priority Sector A/? of ,<23 or credit E1? of ,<23 or credit ,dvances e9uivalent amount of off- e9uivalent amount of off"alance sheet exposure "alance sheet exposure whichever is higher whichever is higher Total agricultural advances 0D? of ,<23 or credit e9uivalent amount of off"alance sheet exposure whichever is higher. !:ndirect lending in excess of A..? of ,<23 or credit e9uivalent amount of off "alance sheet exposure will not "e reckoned for 0D? "ut all will "e taken for A/? target for priority sector advances# *icro & Small 5nterprises ,dvances to *S5 will "e !*S5# advances computed for priority sector target of A/? of ,<23 or credit e9uivalent amount of off "alance sheet exposure whichever is higher. <o target. orms part of total priority sector target

<o specific target. orms part of total priority sector target.

*icro enterprises within i# A/? of total advances to <o target. orm part of total *icro & small enterprises *S5 sector should go to priority sector target sector *icro !*fg.# enterprises having investment in plant & machinery upto -s, 0/ 'akh and *icro !service# enterprises having investment in e9uipment upto -s. A 'akh. ii# 1/? of total advances to *S5 should go to *icro !*fg.# enterprises having investment in P&* a"ove -s. 0/ 'akh and upto -s. 1. 'akh and *icro !service# having
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investment in e9uipment a"ove -s. A 'akh and upto -s. 0/ 'akh. !i.e. >/? of *S5 advances should go to *icro 5nterprises#. 5xport 3redit 5xport credit is not a separate <o target. orm part of total category. 5xport credit to priority sector target eligi"le activities under agriculture and *S5 will "e reckoned for priority sector lending under respective categories 0/? of ,<23 or credit <o target. orm part of total e9uivalent amount of off priority sector target <o "alance sheet exposure target whichever is higher.

,dvances to weaker sections

,d@usted <et 2ank 3redit !,<23# i.e. <et 2ank 3redit !outstanding 2ank 3redit in :ndia minus 2ill -ediscounted with -2:(other approved financial institutions# plus investments made "y "anks in non-S'- "onds held in $T* category plus other investments eligi"le to "e treated as part of priority sector lending !e.g. investments in securitised assets# or 3redit 59uivalent amount of =ff-2alance Sheet 5xposures !=25#, whichever is higher, as on *arch E0 of the previous year. Deposits placed "y "anks with <,2,-D(S:D2:(<$2, as the case may "e, in lieu of nonachievement of priority sector lending targets(su"-targets, though shown under Schedule D 7:nvestments7 in the 2alance Sheet at item : !vi# - 7=thers7, will not "e reckoned for ,<23 computation#

Penalties !or Non6achie+e ent o! Priorit0 Sector len&ing targets The shortfall in lending to priority sector in respect of domestic scheduled commercial "anks shall "e allocated for contri"ution to the -ural :nfrastructure Development und !-:D # esta"lished "y <,2,-D or funds with other inancial :nstitutions as specified "y -2:.

Other co

on gui&elines)

<o loan related and adhoc service charges(inspection charges should "e levied on priority sector loans up to -s. 1.,///. The rates of interest on various categories of priority sector loans will "e as per directives issued "y -2: from time to time
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, register should "e maintained at the "ranch, wherein the date of receipt, sanction(re@ection(dis"ursement with reasons therefore, etc., should "e recorded. The register should "e made availa"le to all inspecting agencies. 2anks should give acknowledgement for loan applications received from weaker sections, etc.

!Source) -2: *. circular#

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