Priority Sector Lending

ORIGIN & EVOLVEMENT OF PRIORITY SECTOR LENDING:

1972- Description of priority sector lending formalised

1974- 33.3% target fixed, to be achieved by year 1979

1980- Target revised to 40%, Concept of weaker section introduced

2007- Review by RBI in-house group (CS Murthy committee)

2012- Major changes – MV nair committee

2015 – Major changes RBI working group wef 23.04.2015

PRIORITY SECTIR LENDING:

Activities:

1. Agriculture
2. 2.Micro, Small & Medium enterprises
3. Export credit
4. Education Loan
5. Housing Loan
6. Social Infrastructure
7. Renewable energy
8. Other priority sector
9. Investment which qualify for priority sector classification

LINKAGE TO TARGET:
Target expressed as % of ANBC or CEoBE whichever is higher as on
31st March of previous year

ANBC Adjusted net bank credit (i.e Fund based exposure)

CEoBE Credit equivalent of off balance sheet exposure

(i.e Non Fund based exposure)

Target Achievement Average of 4 qly outstanding priority sector loans

During the current year to be taken

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ANBC Calculation
1. Bank credit in India (item vi, form A special return)
2. Bills rediscounted with RBI/other approved FIs
3. Net Bank Credit (1-2)
4. Bond/debentures in non SLR category under HTM category + other investments eligible to be
treated as priority sector + deposit with RIDF/other funds with NABARD/NHB/SIDBI
5. Eligible amount of exemptions on issue of long term bonds for infrastructure and affordable
housing
6. Eligible advances in India against incremental FCNR/NRE FD qualifying for exemption from
CRR/SLR
7. Adjusted net bank credit (3+4-5-6)

GOALS/TARGET

(Domestic banks + Foreign banks with 20 or more branches)

Priority sector loans – Minimum 40% of ANBC or CEoBE

Mandatory sub target within 40% -

1. Agriculture advances
2. Weaker section
3. Micro enterprise
4. Minority community

Mandatory sub Target – Agriculture

1. Agriculture loans – 18% of ANBC or 45% of priority sector
2. Loans to non corporate farnmers (individual) minimum 13.50% of ANBC
3. Loans to Marginal & Small farmers – 8% of ANBC (it has now become applicable to foreign banks
from FY 2018-19)
Marginal farmer – Land holding up to 1 Hectare
Small Farmer – land Holding above 1 Hectare but up to 2 Hectare

System wide average – of the last 3 years achievement with regard to overall direct lending to non-
corporate farmers is notified by RBI every year. For the FY 2019-20 it was 12.11% ( against 13.50%)

Priority sector Targets – Weaker section

- Weaker section -10% of ANBC or 25% of priority sector loans

Weaker section activities –

- Small & marginal farmers
- Artisan & village cottage industries loans upto Rs.1.00 lakhs
- Self help group

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 - SC/ST
- Distressed farmers for debt swap of non institutional loans
- Distressed persons other than farmers(loan upto 1 lakh) for debt swap
- Individual women beneficiaries (Loan upto Rs.1.00 Lakh)
- Disabled persons
- Beneficiaries of deendayal antyoday yojana – national Rural livelihood mission DAY-NRLM
- Beneficiaries of Deendayal antoday yojna – National urban livelihood mission DAY-NULM
- Beneficiaries of DRI scheme
- Scheme of Rehabilitation of Manual Scavengers (SRMS)
- Jan dhan yojan (OD upto Rs.10,000/-) annual income max. Rs.1.00 lakh in Rural & Rs.1.60 lakhs
for others

Domestic Banks + Foreign banks (20 or more branches)

Sub target for micro enterprises-
- 7.50% of ANBC (to become applicable to foreign banks for FY 2018-19)

PM task Force Target

1. Annual increase in No. Of micro enterprises loan accounts -10%
2. Annual increase in MSE advances -20%
3. 60% of MSE lending should be to Micro enterprises
4. All loans to KVIC, to be classified as loans to micro enterprises

Target under Govt. Sponsored Schemes

DRI – No overall target

- Within DRI 40% to SC/ST
- Within DRI 2/3rd disbursement through rural & semi urban branches
PMEGP – 50% of total cases through rural branches
NRLM- All loans to women self help groups
NULM – SC/ST – In the ratio of local population (within this 30% to women, 3% to disabled and 15% to
minorities)

Foreign banks less than 20 Branches

1. Priority sector loans – 40% of ANBC or CEoBE (increased from 32% to 40% within 5 years by
31/03/2020)

Mandatory sub targets – MSE Laons

This is same as in case of domestic banks

Urban co-operative banks

- Overall Target -40% of ANBC

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 - There is no Sub target

Target for minority community

- 15% of priority sector loans should be given to minority community (as per ministry of minority
affairs 12/12/2013)
- Minority communities are – Muslims, Sikhs, Christians, Buddhist, Jains & parsi (Total-6)
- No. Of minority concentration districts in India-121

Regional Rural banks

-Overall priority sector target – 75% of total outstanding credit (Not ANBC)

Sub target within overall target –

1. Agriculture Loans – 18% of total outstanding
2. Small and marginal farmers – 8% of total outstanding credit
3. Weaker section – 15% of total outstanding credit
4. Micro Credit -7.5% of total outstanding credit

SHORTFALL IN PRIORITY SECTOR LENDING TARGETS (FOR SC 3/4/5)

If lending targets are not achieved by domestic banks & foreign banks –
Shortfall in
1. Priority sector target of 40%
2. Agriculture advances target by 18%
3. Weaker section target by 10%

- To be deposited with Rural infrastructure Development Fund(RIDF) Or any other fund decided by
RBI.
- In balance sheet, the amount deposited with these funds to be classified as Other Assets(schedule-
11)
- In Priority sector, it is classified as part of respective activity wef 31/03/2014
- ROI on deposit with RIDF – Bank rate - 2 to 4%
- ROI on Loan from RIDF – Bank rate – 1.5%

PRIORITY SECTOR LOANS –MSME INVESTMENT, LOAN, COLLATERAL

As per MSME Development Act 2006 (notified on 2nd Oct 2006)
MSME comprises 3 types of enterprises-
1. Micro
2. Small

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 3. Medium

Mfg. Or production and processing or Service/Business units

preservation units
Investment in P&M Investment in Equipments
Micro Enterprises Max. Rs.25 lakhs(Original Cost) Max. Rs.10 Lakhs
Small Enterprises >25 L to 5.00 Crore >10 L to 2.00 Crore
Medium Enterprises >5.00 Cr to upto 10.00 Crore >2.00 Cr to 5.00 Cr

Clubbing of investment of 2 units of same person not to be made, for the purpose of classification.

Original Cost of Investment

Following items as notified by ministry of MSME(oct 05,2006), are to be excluded while calculating
original cost –
1. Land & Building
2. Pollution control equipments
3. Tools
4. Dies
5. Generator set
6. Few other items

Rule for registration of MSME

- Registration as MSME can be got done with state Govt.
- To give loan, registration is not mandatory
- Loan can be granted to non registered units also.
Mandatory Registration for-
- Medium enterprises in manufacturing or production and preservation only.
Optional Registration for –
- All micro enterprises
- All type of small enterprises
- All type of service enterprises

LOAN TO MSMEs
Amount of Loan
- Need based working capital (including export credit0 or Term loan or non fund based loans
like LC/BG.

Composite Loan under Single Window (TL & WC in one loan account)
- Max. Amount is restricted to Rs.100 Lakhs

Loans given under KVI sector (Irrespective of investment & Location)

- To be classified as loans to micro enterprise loans
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Other Loans to MSMEs
- Persons involved in assisting decentralised sector in supply of inputs and marketing of
output of Artisan/Village & Cottage industries
- Co-operatives of producers in decentralised sector (Artisan & VC industries)
- Loan to MFIs for on lending to MSE sector
- Loan under GCC (LUCC, WCC,SCC) – classified as MSE
- Outstanding deposits with SIDBI in lieu of, priority sector shortfall
- OD upto Rs.10,000/- under PMJDY
- Factoring of MSE receivables

Loan application disposal period – At Bank’s discretion

Collateral Security Rules –

1. Loan amount upto 10 Lakhs - No Collateral (Even if customer offers the security)
2. Loan upto Rs.200 lakhs guaranteed by CGT-MSE - No collateral or III Party Guarnatee
3. Good trach record account borrowers with loan upto Rs.25.00 lakhs – Bank’s discretion

PRIORITY SECTOR LOANS – MSME

NATIONAL EQUITY FUND:
NEF has created to provide margin to MSEs:
- Margin available as soft loan
- Eligible project cost- Max. Rs. 50 lakhs
- Soft loan @25% of project cost Max. Rs.10 lakhs
- Repayable in 7-10 years (3 Year moratorium)
- DER to be 1.875:1
- Promoter Contribution – 10%
- Condition: All needs should be met by one bank only.

CREDIT LINKED SUBSIDY SCHEME

Objective – Technology up gradation of MSEs
Eligible amount of Loan - max. Rs.100 lakhs
Rate of Subsidy – 15% of purchase price of plant & Machinery
SIDBI & NABARD are the implementing agency (Nodal Agency)

GENERAL CREDIT CARD

- Any individual engaged in NON-Farm activities, which is eligible for priority sector
- Loan includes working capital & Term Loan
- Card to be issued as smart card or Debit card

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 - Validity – Available on revolving basis
- Max. Amount – Bank discretion
- Collateral security – As per RBI rates
- Loan given under other cards like LUCC, WCC, SCC to be reported under GCC
- Outstanding amount to be classified as MSE priority sector advance.

LAGHU UDYAMI CREDIT CARD

- LUCC is available to MSE
- Eligibility – 3year standard account.
- Max. Amount – Rs. lakhs (but bank has discretion to increase it)
Calculation of Limit
1. 20% of projected sales (For manufacturers & sellers)
2. For professionals & self employed persons – 50% of gross income
3. Card Validity – 3 Year (annual Review)
4. Card is not available for transport operators

WEAVER’S CREDIT CARD

1. Scheme by ministry of textiles for handloom weavers (not for power weavers)
2. Type – Term Loan or CC (card Validity – 3 yrs, annual review)
3. Amount Max. Rs.2.00 lakhs
4. CGT-MSE guarantee is available
5. Interest subvention - @3% for first 3 years

SWAROZGAR CREDIT CARD

1. It is NABARD scheme
2. Card issued to weaker section persons
3. Amount Rs.25000/-
4. No collateral security
5. Validity period – 5 years
6. Classification – MSE advance

MUDRA (Micro Unit Development & Refinance Agency)

- Mudra Regd., under companies act 2013 in April 2015, it is wholly owned subsidiary of
SIDBI(Paid up capital- Rs.750 Crore)
- It is engaged in development & refinancing of micro enterprise sector.
- Corpus –Rs.20,000 Crore
- Guarantee Fund – Rs.3,000 Crore
3 Type of schemes-
Shishu – upto Rs.50,000/- (target-60% of total MUDRA)
Kishore - >50,000/- upto 5.00 lakhs
Tarun - >5.00 lakhs upto 10.00 lakhs

CREDIT GUARANTEE SCHEME FOR MICRO UNITS (CGSMU)

Guarantee provided by - NCGTC – National Credit Guarantee trust company
1. Eligible Loans – Loan under Mudra Scheme & OD upto Rs.10,000/- under PMJDY
2. Guarantee Fee – Standard rate 1% + Risk Premium on NPA level & claim payout ratio

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 3. Fee payable within 16 days from beginning of the year
Cover –
1. First 5% of amount is loss to MLI
2. Out of remaining 95%, 50% cover on amount of default is available.(Amount of default means
NPA for 6 months)
3. Claim Payment period – 60 days (60 days within account become NPA)

CREDIT GUARANTEE SCHEME FOR STAND UP INDIA

1. Guarantee provided by – National Credit guarantee trust company
2. Eligible borrowers – SC/ST, women with loan amount above Rs.10 Lakhs upto Rs.1.00 Crore
3. ROI - Base rate or MCLR + 3%+ Tenor premium (means maturity premium)
4. Guarantee fee – Standard rate 0.85%+Risk premium on NPA level & claim payout ratio
5. Cover – Upto 50 Lakhs -80% i.e Max.40 Lakhs, Above 50 Lakhs -50% i.e Max.25.00 lakhs, Total
maximum coverage -65.00 Lakhs
6. Claim Payout – 30 days, 75% immediately. Blance 25% on conclusion of recovery proceedings

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CGT-MSE GUARANTEE SCHEME
1. Scheme offered by SIDBI + Govt. Of India
2. Existing, New units, rehabilitation of already financed units, IT & software
3. Eligible accounts –
A. Loan amount upto Rs.200 lakhs (Rs.50 lakhs for RRBs) – Term Loan, Working capital, Non
Fund based loans
B. No collateral or III party guarantee can be obtained. If collateral obtained for part of laon
(Hybrid), remaining part upto Rs.200 lakhs can be covered by CGT-MSE guarantee.
C. ROI – as per RBI guidelines
D. For Retail Traders – Eligible amount upto 100.00 lakhs
E. Guarantee Fee -2% and Guarantee cover -50%

CREDIT GUARANTEE FEE

Three components of fee –
Standard rate + NPA level + Claim payout ratio

Standard rate of annual guarantee fee(per annum)

For Loans to Women, MSEs & NE states Other Loans

Upto Rs.5.00 Lakhs 1.00% 1.00%
Above Rs.5.00 lakhs upto Rs. 50 Lakhs 1.35% 1.50%
Loan above 50 L upto 200 Lakhs 1.80% 1.80%
(Fee on sanction amount first year, on outstanding balance subsequently)

If fee is not paid in time, CGT-MSE may permit the continuation of guarantee on payment of
fee along with interest @ Bank Rate+4%

CGTMSE GUARANTEE COVER

Women & NE states Other MSEs Other Loans

Loan upto 5.00 lakhs 85% 85% 75%
Loan >5L upto 50 lakhs 80% 75% 75%
Loan above Rs. 50 Lakhs 75% 75% 75%

Example- Loan to women enterprise. Outstanding balance 80 lakhs in default. What is the
amount of Guarantee cover?
Loan -80 Lakhs, Coverage-75%
Claim Amount-80*75%=60 Lakhs

GUARANTEE INVOCATION
1. Account is NPA, Suit Filed & Guarantee Fee paid
2. Claim Lodgement within 3 Year (max. Period)

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 3. This 3 Year will start from date of account becoming NPA. If 18 months Lock in Period is
complete.
4. From completion of 18 month lock in period, if account become NPA within 18 Months
5. 18 months lock in period starts from date of guarantee fee payment or last
disbursement, whichever is later.

Claim Payment-
1. 75% claim within 30 days (For delay payment – interest @Bank rate)
2. Balance amount on conclusion of recovery process
3. Time gap between initial claim payment and final payment – 3 years
4. Suit File mandatory – if amount is above Rs.50,000/- (Upto Rs.50,000/- no suit to be
filed)
5. After getting recovery, proceedings to be returned to CGTMSE. If delay in remitting
recovered amount, interest @ bank rate+4% to be paid.

CAP ON CLAIM – 2 TIMES OF (AMOUNT OF FEE + RECOVERY REMITTED IN PREVIOUS FY)

PRIORITY SECTOR –AGRICULTURE LOANS (1)

1. Overall Target – 18% of ANBC or 45% of Priority sector
2. Direct loans to farmers (Individual) – Minimum 13.50% of ANBC
3. Loan to Marginal & Small farmer – 8% of ANBC (This includes producer companies & co-
operatives of farmers where the membership of SF/MF is min.75% by number & whose thresh
holding share is not less than 75% of total landholding.

Segments –
1. Farm Credit
2. Agriculture Infrastructure
3. Allied Activities

FARM CREDIT – Non Corporate (individual) farmers

Loan to farmers (including SHG/JLG – disaggregated data is maintained) engaged in Agriculture & allied
activities.
1. Production Credit – Like Crop Loans
2. Investment Credit – Like Tractor/ Other equipment
3. Loan to pre-harvest and post harvest activities (e.g. spraying, weeding, harvesting etc.)
4. Produce Marketing loans – Pledge/hypothecation of produce or ware house receipt) upto 50
lakhs for 12 month.
5. Loan to small/Marginal farmers to purchase land & then cultivate it.
6. Loan to poor farmers for pre-payment of non-institutional loans (Called rural debt swap scheme)

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FARM CREDIT – Corporate farmers
Farmer’s producer organizations/companies of individual farmers, partnership firms and co-operative of
farmers upto Rs.2 crore for –
1. Production Credit – Like Crop Loans
2. Investment Credit – Like Tractor/ Other equipment
3. Loan to pre-harvest and post harvest activities (e,g spraying, weeding, harvesting etc.)
4. Produce Marketing loans – Pledge/hypothecation of produce or ware house receipt) upto 50
lakhs for 12 month.

CROP LOAN
1. Amount of crop Loan – Need based
2. Loan amount calculated with reference to Scale of Finance prepared by Dist. Technical
committee(DTC)
3. Disbursement through Kisan Credit Card (KCC)
Damage to crop due to natural calamities – Relief
In this case
– Crop Loan can be converted to Medium term loan and period will be according to crop damage
level
– If damage level is 33% to 50% - 2 Years
– If damage is more than 50% - Then conversion period is 5 Years

Under this relief scheme, farmer can also be given consumption loan upto Rs.10,000/-

KISAN CREDIT CARD-2012 BHASIN COMMITTEE

Amount – Need based for crop loans (Consumption credit + investment credit)

Calculation of amount for 1st year –

(Scale of finance*Area) + 30% of calculated amount (10% for post harvesting expences & 20% for repair,
insurance et.)
Limit for 2nd year onwards –
Add 10% as escalation cost, to previous limit
Maximum amount of limit – Short term limit for 5 Years + Term Loan repayable in 5 years
Limit for Marginal farmers – Rs.10,000/- to 50,000/-
Validity – at bank discretion (to be renewed annually)
Personal Accident Insurance –
1. Rs.50,000/- in case of death or permanent disability
2. In case of partial disability – Rs.25000/-
3. Insurance premium is negotiable. Premium will be shared between bank and borrower (Ratio-
2:1)
4. Age – At the time of Insurance – max.70 years
5. For credit balance in KCC account, SB interest will be apid

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 6. Delivery channel – Branch, Cheque, ATM, Mobile, PoS, BCs

Interest subvention – Short term crop loans

Interest subvention for Banks-
1. Eligible Loans – Short term crop loan upto Rs.3.00 lakhs
2. ROI from farmers – 7%
3. Subvention for banks from central Govt. - 2%
4. Claim through RBI on half yearly basis.

Additional subsidy to farmers for prompt repayment

- Rate of subvention -3% (farmers who are doing regular payments, they will get effective rate
@7-3=4%will be effective rate)
- Claim through RBI on yearly basis

Collateral security rules for crop loans

- Loan amount upto Rs.1.60 Lakhs (earlier it was Rs.1.00 Lakh) - No margin, No collateral
- If there is recovery tie up (with some III party) , collateral security upto Rs.3.00 lakhs not
required. (e.g sugarcane loan- tie up with sugar mills)

No Dues Certificate
-not to be insisted for any priority sector loan as per RBI guideline -2015.

PRIORITY SECTOR – AGRICULTURE LOANS (2)

AGRICULTURE INFRASTRUCTURE
- Loan for construction of storage facility (warehouse, Market yards, Godowns) including cold
storage units to storage agriculture produce irrespective of location.
- Soil conservation and watershed development
- Plant tissue culture projects and agri bio-technology, seed production, production of bio-
pesticides, bio-fertilizers and vermin composting.
- Aggregate loan limit from banking system - Rs.100 Crore

ANCILIARRY ACTIVITIES
- Loan upto Rs.5 Crore to co-operative societies for farmers for disposal of farmer produce
- Loans given under Agri-clinic & Agro business centres scheme of NABARD
- Loan for food & agro processing units upto aggregate loan limit of Rs.100 Cr from banking
system

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 - Loan to PACS, FSS and LAMPS for onlending to farmers
- Loan to MFIs (Satisfying qualifying asset criteria) for on lending to farmers
- Outstanding deposit in RIDF/other funds with NABARD

PM FASAL BIMA YOJNA

- Scheme launched on 18.02.2016, replacing rashtriya krishi bima yojna
- Operated by AICL (agri insurance Co.Ltd.) + other insurance companies
- All crops with crop yield data eligible
- All farmers are eligible. It is mandatory for borrower farmers.

Risk Covered –
1. Yield Loss or production loss
2. Prevented sowing (25%)
3. Post harvest (for 14 days)
4. War & Nuclear risk is not covered

Sum Insured –
Notional Threshold yield * MSP

Premium –
Kharif – 2%
Rabi – 1.5%
Annual Crop – 5%

Level of indemnity or Level of risk or level of coverage

- 70%, 80% & 90% according to insurance Co.

CROP DURATION – VYAS COMMITTEE

Crop Classification –
- Crops are either short duration or long duration crops
- Short duration – harvested within 12 months
- Long Duration – Harvested after 12 months
- Classification of individual crop as short duration or long duration, based on state level Bankers’
committee decision in each state

CROP SEASON (TRADITIONAL)

Rabi Crop - Oct- May
Kharif Crop - May-Oct

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AGRI CLINIC & AGRO BUSINESS CENTRES (NABARD SCHEME)
Eligible – Agri graduates (max-5, in case of joint ventures)
Project – Individual – upto 20 Lakhs (25 Lakh for highly successful cases)
Joint Ventures (JV) of 5 persons – 100 Lakhs
Margin – Upto project cost Rs.5.00 lakhs – NIL
Project cost above 5 Lakh – margin 25% on entire amount
Collateral Security – Upto 5 lakh – NIL, Beyond 5 lakh – Bank’s discretion
Capital Subsidy (Called composite subsidy) – 36% of project cost (44% for SC/ST, Women, NE states)
Repayment – 5-10 years + Moratorium period upto 2 years

FARMERS’ CLUB
NABARD financial support – Rs.10,000/-p.a. for first 3 years (50% advance & rest 50% reimbursement)
for the purpose of:-
1. Formation/Maintenance of Club – Rs.2000/-
2. Awareness creation & Orientation creation – Rs.5000/-
3. Meet with experts – Rs.3000/-

- If amount exceeds Rs.10,000/- in first 3 years, it is to be met by Banks upto Rs.5000/-

- 4th & 5th year contribution by banks – Rs.10,000/-
- No. Of members – Min. 10, Max.- No limit
- 2 office bearers (1 Chief Co-ordinator & 1 Asst. Co-ordinator)

CULTURES & REVOLUTIONS

Sericulture Silk Revolution
Mulbery sericulture
Aquiculture Shrimp farming, fish production
Apriculture Mushroom Production
Apiculture Rearing of honey bees
Pisciculture Fish farming
Olericulture Vegetable production
White revolution Milk Production
Green revolution Crop Production
Yellow Revolution Pulse production
Blue revolution Pisciculture
Rainbow revolution Flower production

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FINANCING THROUGH JOINT LIABILITY GROUPS (JLGs)
- JLG is a group of 4-10 small/MF and landless farmers
- Objective – is to give loans to farm, Non-farm, Off-farm activities, on the security of group
guarantee
There are 2 models of Loan
Model-1 To a member individually
Model-2 To the group as a whole

NABARD Refinance - 100%

Incentive of Rs.2000/- (Payment in 3instalments) from NABARD for prompt JLG.

PRIORITY SECTOR –HOUSING /EDUCATION

Housing loan (direct housing Loan) –

Housing loan per dwelling unit –
Places with population 10lakhs & above – Max. House cost Rs.45 lakhs, Max. Housing Loan-35 Lakhs
(both conditions should be fulfilled)

Population less than 10 Lakhs

Max. House cost Rs.30 lakhs and Max. Loan Rs.25 lakhs

Repair of House –
Rural/SU/Urabl area - max. Loan 2 lakh
Metro Area - Max. Loan 5 lakh

Indirect Housing Loan –

through Govt. Agencies engaged in construction of house or slum clearance
Loan – Need based but per dwelling unit max. Rs. 10 lakhs

Housing project for EWS/LIG

Annual family income
EWS – 3 Lakhs p.a LIG – 6 lakhs pa
Loan amount is need based (but per dwelling unit cost Max. 10 Lakhs)

NHB approved housing finance companies for on-lending –

- Rs.20 Lakhs per borrower (earlier it was 10 lakhs. This 20 lakh limit is upto 3.03.2020, which will
be reviewed by RBI)
- Total loan to HFCs, Max.5% of priority sector loans of bank on ongoing basis.
- Loans to staff members under staff loan scheme are not part of priority sector lending.

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PM AWAS YOJANA
LIG MIG-1 MIG-2
Annual family Income 3 to 6 Lakh >6 l to 12 Lakh >12 L to 18 Lakh
Eligible Loan Rs.6 Lakh Rs.9 Lakh Rs.12 Lakh
Interest Subsidy 6.5% 4% 3%
Repayment 20 Yrs 20Yrs 20 Yrs
Carpet Area 60Sq. Mt 160 Sq. Mt. 200 Sq. Mt.
Discount Rate 9% 9% 95

Affordable Housing – Include housing loan under priority sector + Housing Lon upto 50 lakh (Cost 654
Lakh) in 6 metro centres and Rs.40 lakhs (House cost Rs.50 Lakhs) in other places.

HOUSING LOAN – GUARANTEE FUND

Credit risk guarantee fund trust for low income housing
Eligible Loans – Upto Rs.5 Lakhs, if No collateral
ROI – Max. 2% above MCLR of Bank
Cover – Upto 2 Lakh – 90% above 2 L to 5 Lakh -85%
One time Guarantee fee – 1% (to be paid within 30 days)
Claim – 75% claim within 60 days, balance on completion of recovery proceedings.

EDUCATION LOAN –IBA MODEL SCHEME

Max. Amount to be classified as priority sector – 10 lakhs
(Earlier it was 10 lakh for education in India & 20 L for education abroad)
Margin –
Loan upto Rs.4.00 lakhs NIL
Beyond 4 lakhs (margin will be on entire loan amount) - 5% for education in India & 15% for education
abroad
Repayment - 15 years after moratorium period
Moratorium - One Year + Period of studies (in case of non completion of studies, it can be
extended upto 2 years)
Security Rule –
1. Parents to be co-borrower in all loans
2. For loan upto Rs.4 lakhs – No other security required
3. Loan above Rs.4.00 lakhs to Rs.7.50 lakhs - 3rd Party guarantee required
4. If loan is above 7.50 lakhs - Collateral security to be taken

EDUCATION LOAN - INTEREST SUBSIDY

1. Scheme for Economically weaker students interest subvention
- for loan with annual family income (AFI) Max. Rs.4.50 Lakhs
- These students need not to pay interest during moratorium

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- Interest during moratorium will be funded by interest subsidy
2. Ambedkar interest subsidy for Economic Backward Class EBC/OBC
- Only overseas courses are eligible. Courses like – masters, M.Phil, Phd for EBC/OBC
- For EBc students Max. AFI not more than 2.50 lakhs p.a
- For OBC students AFI not more than 8 Lakh p.a
- Here also interest during moratorium will be funded by subsidy.

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NCGTC – NATIONAL CREDIT GUARANTEE TRUST COMPANY
National Credit Guarantee for Education Loan

Eligible - Loan upto Rs.7.50 lakhs as per IBA scheme

ROI – MCLR+2%

Margin – IBA Scheme margin

Guarantee fee – 0.5% of outstanding balance, payment of fee within 30 days in beginning of FY

Cover – 75% of default amount. Claim within 1 year of NPA

Claim Payment – 75% within 30 days, Balance after completion of recovery proceedings/Write off

GOVT. SPONSORED SCHEMES – NULM (NATIONAL URBAN LIVELIHOOD

MISSION)
- Scheme by Ministry of housing & Urban poverty Allevation replacing SJSRY scheme wef
01.04.2014. Now this scheme is names as “Dindayal Antyoday Yojana”
Target Group - urban unemployed/underemployed poor identified by Urban Local Body (ULB),
SHG or direct by Banks
Target – Women -30%, Disabled-3%, Minority -15% and SC/St in the ratio of % in local
population.
Education – No condition, 3 to 7 days EDP training, Age -18 years
Project cost for loan to individual – Max. Rs.2.00 lakhs
Margin – Nil upto 50,000/- , above Rs.50,000/- - 5 to 10%
Collateral – No collateral but CGT-MSE guarantee available
Repayment – 5 to 7 years (after 6 to 18 months moratorium)

Group Enterprise (GE) – Minimum 5 members (70% from urban poor families). Age of all
members should be minimum 18 years
Project cost for GE – Max. Rs.10 Lakhs (per person Max. Rs.2 Lakhs)
Margin – upto 50,000/- Nil,
Above 50,000/- - 5-10% of entire project cost
Collateral - No collateral only CGTMSE Guarntee
Repayment – 5 to 7 years excluding 6 to 18 months moratorium period
Capital Subsidy – Not available (capital subsidy is available in PMEGP only)
Time limit to process loan application - 15 days
- SHG can be sanctioned SB account linked OD limit of 1 to 4 times of SB balance.

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Interest subvention for Banks
Eligible Loan – Upto Rs.3.00 lakhs
ROI from borrower – 7%
Subsidy rate – ROI of bank less 7%

Additional subsidy for Women SHG (only Women)

- For prompt repayment @3%
- Effective ROI – 7-3=4%
Funding of Scheme - between Central & State (75:25)
In selected states (Hilly states) - 90:10

DIFFERENTIAL RATE OF INTEREST (DRI)

Annual Family Income Ceiling
Rural Area – Rs.18000/-p.a Urban/Semi Urban areas- Rs.24000/- p.a
Loan – Three type of Loans
1. For economic activity – max. Rs.15000/-
2. Additionally loan for Physically handicapped(PH) – Rs.5000/- for special equipment to run the
activity
3. House Loan – Rs.20,000/- for
A. SC/St B. Person eligible under Indira Awas Yojna
Target –
- 40% of DRI loans to be given to sC/St &
- 2/3rd of DRI loans to be disbursed through rural & semi urban branches
ROI – 4% p.a
Repayment – upto 5 years including moratorium period upto 2 years.

SCHEME FOR REHABILITATION OF MANUAL SCAVANGERS (SRMS)

Scheme launched by: National Safai karamchari Finance development corporation(NSKFDC) under
prohibition of employment as Manual scavangers and their rehabilitation Act-2013
Eligibility – age Min.18 Yrs, 2 Year training with Stipend Rs.3000/-
Cash assistance – total amount Rs.40,000/- (max.per month withdrawal 7000/-)
Loan - max.10 lakhs (Rs.15.00 lakhs for sanitation projects)
Repayment –
Project upto Rs. 5.00 lakh – 5 years(including 2 yr moratorium period)
Project above Rs.5.00 lakhs – 7 Years (including 2 yr moratorium period)
Rate Of Interest –
Project cost upto Rs.25000/- - 5% (for women it is 4%)
Above Rs.25000/- - 6%

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Subsidy (Capital subsidy) –
Project Cost rate of Subsidy
Upto Rs.2.00 lakhs 50% of project cost
>2L to 5L Rs.1 Lakh + 33% of project cost above Rs.2 lakh
>5 lakh to 10 lakh Rs.2 lakh + 25% of project cost above 5 lakh
>10 lakh Rs.3.25 Lakhs

PRIME MINISTER EMPLOYMENT GENERATION PROGRAMME (PMEGP)

Scheme combines – PMRY and KVIC’s REGP scheme.

Implementing Agency – KVIC

Objective – Employement generation through New micro enterprises (Existing unit not eligible)

Borrowers – Individuals, SHG of BPl, Trust, Societies, Production co-operatives

Borrower Eligibility –

Age -18 years minimum family Income – No Ceiling

Education – 8th pass mandatory if project cost is more than 10 lakhs in manufacturing and more than 5
lakhs in service sector.

Project cost – manufacturing -25 lakhs and service sector- max. 10 lakhs

Margin – 10% of project cost ( 55 for special category borrowers)

Special category borrowers Include – Sc/St, Women, OBC, Minority, NE Region, PH, Ex-Serviceman, Hill
& Boarder area

Subsidy as % of project cost - Amount wise NO Limit

Rural area – 25% (35% for special category)

Urban – 15% (25% for special category)

Treatment of subsidy –

1. To be kept as interest free FDR for 3 years

2. No interest on loan equal to subsidy
3. FDR to be credited after 3 years to loan account
4. If account becomes NPA, can be credited before 3 years

Lending targets – 50% of total loans to be disbursed in rural areas

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Rural area means –

1. Places notified as Rural area by state Govt.

2. Small Town upto 20,000 population

Collateral security exemption – Upto 10 lakh Loan – No security to be insisted, CGT-MSE cover to be
taken.

Repayment Period – 3 to 7 years

Moratorium Period – to be fixed by bank (Bank’s discretion)

Family Income – Family means borrower and spouse only, not whole family (loan to one member only of
one family)

NATIONAL RURAL LIVELIHOOD MISSION (NRLM-DAY)

- Launched by Ministry of Rural Development GOI on 01.04.2013
Objective – To promote poverty reduction
Eligible – SHGs – 10-20 women (individuals are not eligible)
In difficult areas & for physically handicapped, Minimum number of members can be 5.

Two type of financial assistance –

1. Revolving Fund
- Minimum Rs.10,000/-, Maximum Rs.15,000/-
- SHG should be minimum 3 months old
- Follow panchsutra ( i.e Regular meetings, Savings, Internal Lending, Recoveries and record
keeping)
2. Loan to economic activity –
- Eligibility: 1. SHG to be minimum 6 month old & 2. SHG follow panchsutra.

Loan to be given in 4 doses as under- Repayment

1st Dose - 6 time of group corpus Min. Rs.1.00 lakh 6-12 month
2nd Dose - 8 times of group corpus Minimum Rs.2.00 Lakh 2-24 Month
3rd Dose – Minimum Rs.3.00 lakh 24-36 Month
4th Dose - Minimum Rs.5.00 Lakh 3-6 years

Type of Loan –
Term Loan or Cc limit (Fresh loan allowed even when existing loan is outstanding but regular)
Security & Margin - NIL upto Rs.10.00 lakh Loan (No Margin/No collateral)

Interest subvention for banks –

- Available to all women SHG
- Loan upto Rs.3.00 Lakh in 250 identified districts
- ROI from borrower – max. 7%

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Subvention rate – Differs from bank to bank – max.5.50%
Additional subsidy for prompt repayment –
Rate -3% then effective ROI after additional subsidy 7-3=4%
Capital subsidy is not available wef 01.04.2013

SOCIAL INFRASTRUCTURE
Objective – Building social infra in Tier II to Tier VI places such as :
1. School
2. Health care facilities
3. Drinking water & sanitation facilities
Loan amount – max. Rs.5.00 Crore per project

EXPORT CREDIT
Incremental export credit over corresponding date of the preceding year, upto 2% of ANBC or CeoBE
whichever is higher can be included in priority sector loan wef 01.04.2015.
Conditions:
1. Sanction limit of Rs.40.00 Crore(earlier it was 25 crore) wef 22.09.2019
2. Turnover condition of upto Rs.100 crore is removed now.

RENEWABLE ENERGY
For project loan – Loan upto Rs.15.00 Crore per borrower
(Project loan consists – 1. Solar power generators 2. Bio-mass based power generators 3. Wind
Mills 4. Micro Hydel Plants 5. Non conventional energy based public utility e.g street lighting
For Individuals – Max. 10 lakh per individual

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OTHER PRIORITY SECTOR –
1. Loan upto Rs.50,000/- per borrower to individual as their SHG/JLG (annual income – rs.1.00 Lakh
in Rural & Rs.1.60 Lakhs in other areas)
2. Loan upto Rs.1.00 lakh to distressed poor (Other than farmers) for debt swap

INVESTMENT – PART OF PRIORITY SECTOR

1. Investment made by a bank in Securitised assets representing priority sector advances of (other
banks other than in “ other priority sector category)
2. Purchase of priority sector advances from other banks. Loan adjustment from recoveries only
(other banks other than in “Other priority sector category”)
3. Investments in Interbank Participation Certificates (IBPCs) issued by other banks on risk sharing
basis, representing priority sector advances
4. Investment in priority sector lending certificates (PSLCs) issued by other banks on risk sharing
basis, representing priority sector advances. Minimum size of PSLC -25 Lakh, Maturity – 31st
March of FY, Trading Through E-Kuber of RBI.

SHG (NABARD) CAPACITY BUILDING STAGE

- Concept started in Bangladesh Gramin Bank
- Group can be formal or Registered
- Member -10 to 20, 70% below poverty line(BPL) persons , rest 20-30% can be above BPL
- SHG can be given revolving fund facility for capacity building, if a group fulfils the following
conditions:-
A. Group should be in existence for 6 months
B. Group has savings called “Group Corpus”

Revolving fund comprises

A. Subsidy, equal to group corpus, minimum Rs 5,000, maximum Rs 10,000, second time subsidy Rs
10,000 for successful utilisation.
B. Bank loan CC/OD upto 4 times of group corpus which can be enhanced by banks at their
discretion.

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 Subsidy would be adjusted against the loan at the end of cash credit period on request of the
group.

MICRO CREDIT
- Micro credit includes loans of small amount not exceeding Rs 50,000 per borrower
- Loan can be given by bank either.
1. Directly, or
2. Indirectly though SHG/JLG mechanism, or
3. To NBFC/MFI for on lending up to Rs 50,000 per borrower provided NBFC/MFI fulfils the
qualifying asset criteria prescribed by RBI on recommendations of YH Malegam
committee.

MISCELENEOUS ASPECTS IN PRIORITY SECTOR

- Disposal period of loan application – at bank discretion.
- For rejection of application, reason in writing to be given to applicant.
- For rejection of SC/ST loan applications, no rejection at branch level but next higher authority. –
Data on priority sector lending to be send to RBI on quarterly and yearly basis within 15 days and
1 month respectively.
- Relaxation for loan up to Rs 25,000 – No service fees, no processing fees, no inspection charges,
no margin, no collateral.

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