The Reserve Bank of India (RBI) on August 02, 2022 has issued a notification to amend the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2020 which is applicable to every Commercial Bank [including Regional Rural Bank (RRB), Small Finance Bank (SFB), Local Area Bank] and Primary (Urban) Co-operative Bank (UCB) other than Salary Earners’ Bank.
The following amendments have been made:
• In point no. 15, which specifies others, sub-point 15.1 has been substituted, namely:
15.1. Loans provided directly by banks to individuals and individual members of SHG/JLG satisfying the criteria as prescribed in Master Direction on Regulatory Framework for Microfinance Loans Directions, dated March 14, 2022.
• In point no. 15, which specifies others, sub-point 15.2 has been substituted, namely:
15.2. Loans not exceeding ₹2.00 lakh provided by banks to SHG/JLG for activities other than agriculture or MSME, viz., loans for meeting social needs, construction or repair of house, construction of toilets or any viable common activity started by SHGs.
• In point 21, which specifies Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for on-lending (not applicable to RRBs, UCBs, SFBs and LABs), sub-point 21.2 has been substituted, namely:
21.2 With effect from May 5, 2021, SFBs are allowed to extend fresh credit to registered NBFC-MFIs and other MFIs (Societies, Trusts, etc.) which are members of RBI recognised ‘Self-Regulatory Organisation’ of the sector, and which have a ‘gross loan portfolio’ (GLP) of up to ₹500 crore as on March 31 of the previous year, for the purpose of on-lending to individuals. In case the GLP of the NBFC-MFIs/other MFIs exceeds the stipulated limit at a later date, all priority sector loans created prior to exceeding the GLP limit will continue to be classified by the SFBs as PSL till repayment/maturity, whichever is earlier. Bank credit as above will be allowed up to an overall limit of 10 percent of an individual bank’s total priority sector lending. These limits shall be computed by averaging across four quarters of the financial year, to determine adherence to the prescribed cap.
[Notification No. RBI/FIDD/2020-21/72 Master Directions FIDD.CO.Plan.BC.5/04.09.01/2020-21]
