RBI/2004-05/301
RPCD. No. Plan. BC.64 / 04.09.01/2004-05
December 15, 2004
The Chairman/ Managing Director/ Chief Executive
Officer
All scheduled commercial banks (including RRBs)
Dear Sir,
Priority Sector Lending – Investment in special
bonds issued by specified institutions
Please refer to our Master
Circular on Lending to Priority Sector dated July 20, 2004 in terms of which
investments made by the scheduled commercial banks in special bonds issued by
specified institutions, viz. State Financial Corporations (SFCs)/State Industrial
Development Corporations (SIDCs), Rural Electrification Corporation (REC), NABARD,
SIDBI, The National Small Industries Corporation Ltd. (NSIC), NHB and HUDCO,
subject to certain conditions, are reckoned as indirect finance to agriculture/SSI/housing
as the case may be within the priority sector lending.
2. With a view to rationalising the banks' investments
under priority sector lending and encouraging banks to increasingly lend directly
to the farmers/other priority sector borrowers, it has been decided that:
- The extant guidelines in respect of classifying the investments
by banks in the bonds issued by the specified institutions as under priority
sector lending may continue up to March 31, 2005.
- The investments that may be made by banks on or after April
1, 2005 in the bonds issued by the specified institutions (except NABARD),
i.e. REC, SFCs/SIDCs, SIDBI, NSIC, NHB and HUDCO shall not be eligible for
classification under priority sector lending.
- The investments, which have already been made/to be made
by banks up to March 31, 2005, in the special bonds issued by the above specified
institutions (except NABARD), shall not be eligible for classification under
priority sector lending with effect from April 1, 2006.
- The investments in the special bonds issued by NABARD shall
not be eligible for classification under priority sector lending with effect
from April 1, 2007.
3. The other terms and conditions laid down
in the above circular remain unchanged. The banks are, therefore, advised to
align their priority sector lendings/investments suitably so as to comply with
the above guidelines.
4. Please acknowledge receipt.
Yours faithfully,
(C S Murthy)
Chief General Manager-in-Charge