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Guidelines On Lending To Priority Sector – Revised

RBI/2006-2007/358
RPCD. No. Plan. BC. 84 /04.09.01/ 2006-07

April 30, 2007

The Chairman/ Managing Director/
Chief Executive Officer

[All scheduled commercial banks
(excluding Regional Rural Banks)]

Dear Sir,

GUIDELINES ON LENDING TO PRIORITY SECTOR – Revised

As announced in the Reserve Bank's Annual Policy Statement for the year 2005-06, the prescriptions relating to priority sector lending have been modified and several new areas included from time to time. There is a view that enlargement of areas has resulted in loss of focus. There have also been suggestions for a further review of the eligibility criteria and other related aspects. Further, it is argued that only 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 should be eligible for inclusion under the priority sector.

2. In this context, an Internal Working Group was set up in Reserve Bank (Chairman: Shri C. S. Murthy) to examine the need for continuance of priority sector lending prescriptions; review the existing policy on priority sector lending including the segments constituting the priority sector, targets and sub-targets, etc.; and to recommend changes, if any, required in this regard. The recommendations of the Group have been examined in the light of the comments/suggestions received from the banks, financial institutions, Non-Banking Financial Companies, Associations of industries, media, public and Indian Banks’ Association, and accordingly the guidelines on priority sector lending have been revised. The detailed revised guidelines are enclosed.

3. These guidelines take into account the revised definition of small and micro enterprises as per the Micro, Small and Medium Enterprises Development Act, 2006.

4. The revised guidelines will be effective with immediate effect. In case, any bank has any difficulty in complying with the revised priority sector guidelines, they may approach Reserve Bank of India with appropriate reasons and time frame for compliance.

5. We are separately forwarding the revised formats of half-yearly and yearly returns for reporting data on priority sector advances.

6. Please acknowledge receipt.

 

Yours faithfully,

(C. S. Murthy)
Chief General Manager-in-Charge


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