Presented by,

Abinash Kr. Mandilwar

Chief Manager, Bank of India, Kolkata
 • National Credit Council held in 1968.
1968-1972 • Description of Priority Sector formalized in 1972.

• Initially no specific targets for PSAs.

• In 1974 it was decided that share of PSAs should increase
1974-1979
to 33 1/3 % of total advances by March 1979.
• Meeting of Union Finance Minister with chief of PSBs, it
1980-2006 was agreed to raise the share of PSAs to 40% of Total
Advances by March 1985.
• The guidelines were revised in the year 2007.
2007-2012 • On recommendation of the M V Nair Committee, revised
guideline was effect from July 20, 2012.

• On recommendation of Internal Working Group (IWG),

23/4/2015 RBI has revised the existing Priority Sector Lending
guidelines w.e.f. 23/04/2015.
 TARGETS UNDER PRIORITY SECTOR ADVANCES

Domestic commercial 40% of ANBC or Credit equivalent

Banks / Foreign Banks
with 20 & above amount of Off - Balance Sheet
branches exposure, Whichever is higher.
40% of ANBC or Credit equivalent
Foreign Banks with amount of Off - Balance Sheet
less than 20 exposure, Whichever is higher, to be
branches achieved by 2020.
40% of ANBC or Credit equivalent
Foreign Banks with
20 & above
amount of Off - Balance Sheet exposure,
branches Whichever is higher. Target had to
achieved by 31 March 2018.
Regional Rural 75% of total outstanding
Bank Advances w.e.f. 1st Jan 2016.
 Agriculture
Others
MSME

PRIORITY
Renewabl Education
e Energy SECTOR Loans
ADVANCE
Social
Infrastructur Export
e credit
Housing
 Adjusted Net Bank Credit (ANBC)
Bank Credit in India (As prescribed in item No. VI of Form ‘A’ as on 31st I
March) under Sec 42 [2] of RBI Act, 1934
Bills rediscounted with RBI and other approved Financial institutions II
Net Bank Credit(NBC) III (I-II)
Investment in non-SLR bonds in HTM category +Other investments eligible IV
to be treated as PSAs + O/s Deposits under RIDF, other eligible funds with
NABARD, NHB and SIDBI on a/c of PSA shortfall + o/s PSLCs
Eligible amount for exemptions on issuance of long term bands for V
infrastructure and affordable housing as per circular [Link].
25/08.12.014/2014-15 dated July 15, 2014
Eligible advance extended in India against the incremental FCNR(B)/NRE VI
deposits, qualifying for exemption from CRR/SLR requirements.
Investments made by public sector banks in the Recapitalization Bonds VII
floated by Government of India.
Adjusted Net Bank Credit (ANBC) III+IV-V-VI-VII
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.
 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 year The total priority sector percentage 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
 TARGETS UNDER AGRICULTURE
Domestic commercial Banks / Foreign
Banks with 20 & above branches:-
❖18% of ANBC or Off- Balance Sheet
exposure, Whichever is higher.
❖Within the 18% target of agriculture,
target of 8% is prescribed for Small &
Marginal Farmer.
❖Foreign Banks with less than 20
branches:- No specific target.
 SMALL & MARGINAL FARMERS
Computation of 8% loan to small and marginal farmers
include the following:
❖Marginal Farmer: Farmer Landholding up to 1 hectare,
❖Small Farmer: Farmer Landholding up to 2 hectare,
❖Landless agricultural labourers, tenant farmers, oral
lessees and share-croppers,
❖Loan to SHG or JLG engaged in agriculture and allied
activities,
❖Loan to farmer producer companies of individual
farmers and co-operative society having 75% Small
and Marginal farmer engaged in agriculture activities.
 AGRICULTURE ADVANCE
Farm Credit Loans to individual farmers, SHG, JLG:
➢Short term loan for raising crops, i.e. Crop Loans.
➢Medium & long term loan to farmers for agriculture &
allied activities.
➢Loan to farmers for pre & post harvest activities.
➢Loan to farmers up to 50 lakh against agriculture
produce (including warehouse receipt) for 12 months.
➢Loans to farmers under KCC Scheme.
➢Loans to distress farmers indebted to non institutional
lenders.
➢Loan to small & marginal farmers to purchase of land
for agriculture purpose.
 AGRICULTURE ADVANCE
Farm Credit Loan to corporate farmer, farmer producer
organization, Partnership forms, Co operative societies
engaged in Agriculture and Allied activities for Loans
limit up to 2 crore per borrower. This will include:
➢ Crop Loans to farmer which will include traditional/
Non-traditional plantations and horticulture, and loans
to allied activities.
➢ Medium & long term loan to farmers for agriculture &
allied activities.
➢ Loan to farmers for pre & post harvest activities.
➢ Loan to farmers up to 50 lakhs against agriculture
produce(including warehouse receipt)for 12 months.
 AGRICULTURE INFRASTRUCTURE
Loan for aggregate sanction limit of Rs. 100 crore
per borrower from the banking system.
➢Loans for construction of storage facilities
(Warehouse, Godowns, market yards) including
cold storage units designed to store Agriculture
produce, irrespective of their location.
➢Soil conservation and watershed development
➢Plant tissue culture and agri-biotechnology,
seed production, production of bio-pesticides,
bio-fertilizer, and vermi composting.
 AGRICULTURE ANCILLARY ACTIVITIES
➢ Loans up to Rs. 5 crore to co-operative societies of farmers
for disposing of the produce of farmers.
➢ Loans for setting Agriclinic & Agribusiness centre.
➢ Loan sanction to MFIs for on lending Ag activities.
➢ Loans for Food & Agro-processing up to an aggregate
sanction limit of Rs. 100 crore per borrower from the
banking system.
➢ Bank loans to Primary Agricultural Co operative
Society(PACS), Farmer’s Service Societies (FSS) and Large
sized Adivasi Multi Purpose Scheme (LAMPS) for on
lending to Agriculture.
➢ Outstanding deposits under RIDF and eligible funds with
NABRD on account of priority sector shortfall.
 MICRO, SMALL & MEDIUM ENTERPRISES
Domestic commercial Banks / Foreign Banks with 20 & above
branches:- All Bank loan to Micro, Small & Medium Enterprises
both manufacturing and services are eligible to classified under
Priority Sector Advances.
Micro Enterprises: 7.5 percent of ANBC or Credit Equivalent
Amount of Off-Balance Sheet Exposure, whichever is higher.
Manufacturing Enterprises: The Micro, Small & Medium
Enterprises engaged in the manufacture or production of goods to
any industry.
Service Enterprises: All Bank loan to Micro and Small Enterprises
engaged in providing or rendering of services in terms of
investment and defined under MSMED Act shall qualify under
priority sectors without any credit cap.
Foreign Banks with less than 20 branches:- No specific target.
 MICRO, SMALL & MEDIUM ENTERPRISES
Khadi and Village Industries Sector (KVI): All loan given to units
of KVI sector will eligible for classification of 7.5% prescribed
to Micro Enterprises.
Other finance to MSMEs:
➢ Loans to person involve in assisting the Artisans, Cottage
Industry.
➢ Loan to cooperative of producers in the Artisans, Cottage
Industry .
➢ Loan sanction to Banks, MFIs for on lending to MSE sectors.
➢ Credit outstanding under all General Credit Cards.
➢ Outstanding deposits with SIDBI on account of priority sector
shortfall.
 TARGETS UNDER EXPORT CREDIT
Domestic commercial Banks:-Incremental export credit over
corresponding date of preceding year, up to 2% of ANBC or
Off- Balance Sheet exposure, whichever is higher, effective
from April 1, 2015 subject to sanction limit of Rs. 40 crore
per borrower.
Foreign Banks with 20 & above branches:- Incremental
export credit over corresponding date of preceding year, up
to 2% of ANBC or Off- Balance Sheet exposure, whichever is
higher, effective from April 1, 2017.
Foreign Banks with less than 20 branches:- Export Credit will
be allowed up to their given target for that year of ANBC or
Off- Balance Sheet exposure, whichever is higher.
 WEAKER SECTION
Weaker Section:-10% of ANBC for Domestic commercial Banks and
Foreign branch having 20 branch and above. 15% target for RRB.
➢ Loan to Small and Marginal farmers,
➢ Beneficiaries of Govt. Sponsored Schemes such as NRLM, NULM, SRMS,
➢ Artisans, Village and cottage industries where individual credit limits do
not exceed Rs. 1 lakh per borrower,
➢ 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 limit to PMJDY account holder upto Rs. 10,000/- with age limit of 18-
65 years.
➢ Minority communities as may be notified by Government of India from
time to time.
 EDUCATION LOAN &
SOCIAL INFRASTRUCTURE
❖Education loan Rs.10 lakh to individual
including vocational course irrespective of
sanction amount.
❖Loan limit of Rs. 5 crore per borrower
for building social infrastructure namely
school, health care facilities, drinking
water, and sanitation in Tier II to Tier VI
centers.
 RENEWABLE ENERGY
Loans up to limit of Rs. 15 crore to
borrowers for purpose like solar based
power generation, biomass based power
generators, wind mills, micro-hydel plants
and for non conventional energy based
public utilities viz. street lighting systems,
and remote village electrification.
For individual households, the loan limit will
be Rs. 10 lakh per borrower.
 HOUSING LOAN
For Purchase/Construction: Metro (Population 10 lakh) Rs. 35 lakh & other centres
Rs. 25 lakh provided overall cost not exceed Rs. 45 lakh & Rs. 30 lakh respectively
For Repair/Renovation: Metro Rs. 5 lakh and other centre Rs. 2 lakh.
Note: The housing loans to banks' own employees will be excluded.

Housing Finance Companies (HFCs), approved by NHB for on-lending for the
purpose of purchase/construction of individual dwelling units or for slum clearance
and rehabilitation of slum dwellers, subject to an aggregate loan limit of Rs. 10 lakh
per borrower. The eligibility under priority sector loans to HFCs is restricted to five
percent of the individual bank’s total priority sector lending, on an ongoing basis.

Assistance given to any Govt. agency for construction of dwelling units or for slum
clearance and rehabilitation of slum dwellers subject to ceiling of Rs. 10 lakh per
dwelling units.
For construction of houses to economically weaker sections & low income groups,
the total cost of which do not exceed Rs. 10 lakh per dwelling unit. For the purpose
of identifying the EWS and LIG, the family income limit is revised to Rs. 3 lakh per
annum for EWS and Rs. 6 lakh per annum for LIG, in alignment with the income
criteria specified under the Pradhan Mantri Awas Yojana.
 OTHERS
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/-.
 PRIORITY SECTOR LENDING
CERTIFICATES
The outstanding priority sector lending
certificates bought by banks will be eligible for
classification under respective categories of
priority sector provided the assets are
originated by banks, are eligible to be classified
as priority sector advances and fulfill the
Reserve Bank of India guidelines on Priority
Sector Lending Certificates issued vide Circular
[Link]. BC.23/04.09.001/2015-16 dated
April 7 2016.
 INVESTMENTS BY BANKS IN
SECURITISED ASSETS
(i) Investments by banks in securitised assets, representing loans to
various categories of priority sector, except 'others' category, are
eligible for classification under respective categories of priority
sector depending on the underlying assets provided:
(a) the securitised 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.
(b) the all inclusive interest charged to the ultimate borrower by
the originating entity should not exceed the Base Rate of the
investing bank plus 8 percent per annum.
(ii) Investments made by banks in securitised assets originated by
NBFCs, where the underlying assets are loans against gold
jewellery, are not eligible for priority sector status.
 TRANSFER OF ASSETS THROUGH DIRECT
ASSIGNMENT /OUTRIGHT PURCHASES
(i) Assignments/Outright purchases of pool of assets by banks
representing loans under various categories of priority sector,
except the 'others' category, will be eligible for classification
under respective categories of priority sector provided:
(a) the assets are originated by banks and financial institutions which
are eligible to be classified as priority sector advances prior to the
purchase and fulfil the Reserve Bank of India guidelines on
outright purchase/assignment.
(b) the eligible loan assets so purchased should not be disposed of
other than by way of repayment.
(c) the all inclusive interest charged to the ultimate borrower by the
originating entity should not exceed the Base Rate of the
purchasing bank plus 8 percent per annum.
 TRANSFER OF ASSETS THROUGH DIRECT
ASSIGNMENT /OUTRIGHT PURCHASES
(ii) When the banks undertake outright purchase of
loan assets from banks/ financial institutions to
be classified under priority sector, they must
report the nominal amount actually disbursed to
end priority sector borrowers and not the
premium embedded amount paid to the sellers.
(iii) Purchase/ assignment/investment transactions
undertaken by banks with NBFCs, where the
underlying assets are loans against gold jewellery,
are not eligible for priority sector status.
 INTER BANK PARTICIPATION CERTIFICATES
❖ Inter Bank Participation Certificates (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.
❖ With regard to the underlying assets of the IBPC transactions
being eligible for categorization under `Export Credit‘ the IBPC
bought by banks, on a risk sharing basis, may be classified from
purchasing bank's perspective for priority sector categorization.
However, in such a scenario, the issuing bank shall certify that the
underlying asset is 'Export Credit', in addition to the due diligence
required to be undertaken by the issuing and the purchasing bank
as per the guidelines in this regard.
 NON-ACHIEVEMENT OF PRIORITY
SECTOR TARGETS
❖ All scheduled commercial banks having shortfall in lending to
priority sector target/sub shall be allocated amounts for
contribution to rural Infrastructure Development Fund (RIDF)
established with NABARD and other Funds with
NABARD/NHB/SIDBI/other Financial Institutions as decided by the
RBI from time to time.
❖ Non-Achievement of priority sector targets and sub-targets will be
taken into account while granting regulatory clearances/approvals
for various purposes.
❖ While computing priority sector target achievement, shortfall /
excess lending for each quarter will be monitored separately.
❖ The interest rates on banks' contribution to RIDF or any other
Funds, tenure of deposits, etc. shall be fixed by Reserve Bank of
India from time to time.