May 10, 2018
The Chief Executive Officer
All Primary (Urban) Co-operative Banks
Dear Sir / Madam
Revised guidelines on lending to Priority Sector for Primary (Urban) Co-operative Banks (UCBs)
Please refer to our circular UBD.CO.BPD.(PCB).MC.No.18/09.09.001/2013-14 dated October 8, 2013 on the captioned subject and amendments thereto from time to time, consolidated in Master Circular DCBR.BPD.(PCB).MC.No:11/09.09.001/2015-16 dated July 1, 2015. The existing guidelines have been reviewed and it has been decided to issue revised guidelines (as per Annex-I) in supersession of the guidelines in the above-mentioned Master Circular.
2. Salient features of the revised guidelines are as under:
- Target for lending to total priority sector and weaker section will continue as 40 per cent and 10 per cent, respectively, of Adjusted Net Bank Credit (ANBC) or credit equivalent of off-balance sheet exposure, whichever is higher, as hitherto.
- Agriculture: Distinction between direct and indirect agriculture is dispensed with.
- Bank loans to food and agro processing units will form part of Agriculture.
- Medium Enterprises, Social Infrastructure and Renewable Energy will form part of priority sector.
A target of 7.5 per cent of ANBC or credit equivalent of off-balance sheet exposure, whichever is higher, has been prescribed for Micro Enterprises.
- Education: Distinction between loans for education in India and abroad is dispensed with.
- Micro Credit ceases to be a separate category under priority sector.
- Loan limits for housing loans qualifying under priority sector have been revised.
- Priority Sector assessment will be monitored through quarterly and annual statements.
3. The revised guidelines will be operational with effect from the date of this circular. Priority sector loans sanctioned under the guidelines issued prior to the date of this circular will continue to be classified under priority sector till maturity / renewal.
4. Achievement of Priority Sector targets
Achievement of priority sector targets will be taken into account while granting regulatory clearances / approvals for various purposes. With effect from April 1, 2018, achievement of priority sector targets will be included as a criterion for classifying a UCB as Financially Sound and Well Managed (FSWM), in addition to the criteria specified in our circulars UBD.CO.LS.(PCB).Cir.No.20/07.01.000/2014-15 and DCBR.CO.LS.(PCB).Cir.No.4/07.01.000/2014-15 dated October 13, 2014 and January 28, 2015 respectively. For the financial year 2018-19, shortfall in achieving the priority sector target / sub-target will be assessed based on the position as on March 31, 2018. From the financial year 2019-20 onwards, the achievement at the end of the financial year will be arrived at based on the average of priority sector target / sub-target achievement as at the end of each quarter. Illustrative example is given in Annex-II.
Chief General Manager