National Paper - PLP 2019-20

Policy Initiatives - Reserve bank of India

The following are the important initiatives taken by the RBI in Agriculture and Rural
Sector:

1. Small Finance Banks – Compendium of Guidelines on Financial

Inclusion and Development

In view of the announcement made in the budget 2014-15 regarding creation of a

framework for licensing small banks, and to give a thrust to the supply of credit to micro
and small enterprises, agriculture and banking services in unbanked and under-banked
regions in the country, Reserve Bank decided to licence new “Small Finance Banks
(SFBs)” in the private sector. Following a due process, in-principle approvals were given
to ten applicants to set up SFBs vide press release dated September 16, 2015.

2. Subsequently, Operating Guidelines for Small Finance Banks were issued vide Circular
DBR.NBD.No.26/16.13.218/2016-17 dated October 6, 2016, which prescribed, inter alia,
broad indicative guidelines in areas related to Financial Inclusion and Development. In
continuation with the same, comprehensive set of guidelines in the form of a compendium
is Annexed to the circular. The guidelines are operational with effect from the date of this
compendium.

(RBI/2017-18/14 - FIDD.CO.SFB. No.9/04.09.001/2017-18 dated July 6, 2017)

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=11039

2. Deendayal Antyodaya Yojana - National Rural Livelihoods Mission

(DAY-NRLM) - Aajeevika - Interest Subvention Scheme

Interest subvention scheme on Credit to Women SHG during the year 2017-
18 in 250 districts

i. All women SHGs will be eligible for interest subvention on credit upto ₹ 3 lakhs at 7%
per annum. SHG availing capital subsidy under SGSY in their existing credit outstanding
will not be eligible for benefit under this scheme.

ii. Banks will lend to all the women SHGs in rural areas at the rate of 7%.

iii. Banks will be subvented to the extent of difference between the Weighted Average
Interest Charged (WAIC as specified by Department of Financial Services, Ministry of
Finance for the year 2017-18 and 7% subject to the maximum limit of 5.5% for the year
2017-18. This subvention will be available to banks on the condition that they make SHG
credit available at 7% p.a.

iv. Further, the SHGs will be provided with an additional 3% subvention on the prompt
repayment of loans. For the purpose of Interest Subvention of additional 3% on prompt

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repayment, an SHG account will be considered prompt payee if it satisfies the following
criterion as specified by Reserve Bank of India (RBI).

The revised guidelines for the year 2017-18 on Interest Subvention Scheme under DAY-
NRLM are annexed for implementation by 21 Public Sector Banks and 19 Private Sector
Banks. The circular in respect of RRBs and Co-operative banks will be issued by NABARD.

(RBI/2017-18/80 - FIDD.GSSD.CO.BC.No.17/09.01.03/2017-18 dated October 18, 2017)

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=11150

3. Action Points for Lead Banks on Enhancing the Effectiveness of Lead

District Managers (LDMs)

The Lead Bank Scheme was last reviewed by the “High Level Committee” under Smt Usha
Thorat, then Deputy Governor of Reserve Bank of India, as the Chairperson in 2009. In
view of changes that have taken place in the financial sector over the years, Reserve Bank
of India had constituted a “Committee of Executive Directors” of the Bank to study the
efficacy of the Scheme and suggest measures for improvement. The Committee’s
recommendations were discussed with various stakeholders and based on their feedback,
it has been decided that the following ‘action points’ will be implemented by the Lead
Banks.

i. In view of the critical role played by LDMs, it may be ensured that officials posted as LDMs
possess requisite leadership skills.
ii. Apart from the provision of a separate office space, technical infrastructure like
computers, printer, data connectivity, etc. which are basic necessities for LDMs to
discharge their core responsibilities may be provided to LDMs’ Office without exception.
iii. It is suggested that a dedicated vehicle may be provided to LDMs’ to facilitate closer
liaison with the bank officials, district administration officials as also to organise/ attend
various financial literacy initiatives and meetings.
iv. The absence of a specialist officer/assistant for data entry/analysis is a common and
major issue faced by LDMs. Liberty to hire the services of skilled computer operator may
be given to the LDMs to overcome the shortage of staff/ in case appropriate staff is not
posted at LDM office.

(RBI/2017-2018/156 - FIDD.CO.LBS.BC. No.20/02.01.001/2017-18 dated April 6, 2018)

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=11247

4. Revamp of Lead Bank Scheme - Action Points for SLBC Convener

Banks/ Lead Banks

The Lead Bank Scheme (LBS) was last reviewed by the “High Level Committee” under
Smt Usha Thorat, then Deputy Governor of Reserve Bank of India as the Chairperson in
2009. In view of changes that have taken place in the financial sector over the years,
Reserve Bank of India had constituted a “Committee of Executive Directors” of the Bank

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to study the efficacy of the Scheme and suggest measures for improvement. The
Committee’s recommendations were discussed with various stakeholders and based on
their feedback, it has been decided that the following ‘action points’ will be implemented
by the SLBC Convener Banks/Lead Banks.

i. State Level Bankers’ Committee (SLBC) meetings should primarily focus on policy issues
with participation of only the senior functionaries of the banks/ Government
Departments. All routine issues may be delegated to sub-committee(s) of the SLBC. A
Steering Sub-committee may be constituted in the SLBC to deliberate on agenda
proposals from different stakeholders and finalise a compact agenda for the SLBC
meetings. Typically, the Sub-Committee could consist of SLBC Convener, RBI & NABARD
representatives & senior State Government representative from the concerned
department, e.g. Finance/ Institutional Finance and two to three banks having major
presence. Other issue-specific sub-committees may be constituted as required. A Revised
Agenda for SLBC meetings is attached for implementation.
ii. In cases where the Managing Director/Chief Executive Officer/Executive Director of the
SLBC Convener Bank is unable to attend SLBC Meetings, the Regional Director of the RBI
shall co-chair the meetings along with the Additional Chief Secretary/Development
Commissioner of the State concerned.
iii. The corporate business targets for branches, blocks, districts and states may be aligned
with the Annual Credit Plans (ACP) under the Lead Bank Scheme to ensure better
implementation. The Controlling Offices of the banks in each state should synchronize
their internal business plans with the ACP under Lead Bank Scheme.
iv. At present, discussions at the Quarterly Meetings of the various LBS fora viz. State Level
Bankers’ Committee (SLBC), District level Consultative Committee (DCC) and Block
Level Bankers’ Committee (BLBC) primarily focuses on the performance of banks in the
disbursement of loans vis-a-vis the allocated target under the Annual Credit Plan. The
integrity & timeliness of the data submitted by banks for the purpose has been an issue as
a significant portion of this data is manually compiled and entered into the Data
Management Systems of the SLBC Convener Banks. The extent to which this data
corresponds with the data present in the CBS of the respective banks also varies
significantly. Therefore, there is need of a standardized system to be developed on the
website maintained by each SLBC to enable uploading and downloading of the data
pertaining to the Block, District as well as the State. The relevant data must also be
directly downloadable from the CBS and/ or MIS of the banks with a view to keeping
manual intervention to a minimal level in the process. The procedure relating to the
envisaged intervention in this area is given. Necessary modifications may be made on the
SLBC websites and to the CBS & MIS systems of all banks to implement the envisaged
data flow mechanism.
v. To strengthen the BLBC forum which operates at the base level of the Lead Bank Scheme,
it is necessary that all branch managers attend BLBC meetings and enrich the discussions
with their valuable inputs. Controlling Heads of banks may also attend a few of the BLBC
meetings selectively.
vi. Rural Self Employment Training Institutes (RSETIs) should be more actively involved
and monitored at various fora of LBS particularly at the DCC level. Focus should be on
development of skills to enhance the credit absorption capacity in the area and renewing
the training programmes towards sustainable micro enterprises. RSETIs should design

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specific programmes for each district/ block, keeping in view the skill mapping and the
potential of the region for necessary skill training and skill up gradation of the rural youth
in the district.

(RBI/2017-2018/155 - FIDD.CO.LBS.BC. No.19/02.01.001/2017-18 dated April 6, 2018)

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=11247

5. Revised guidelines on lending to Priority Sector for Primary (Urban)

Co-operative Banks (UCBs)

Salient features of the revised guidelines are as under:

i. Target for lending to total priority sector and weaker section will continue as 40 per cent
and 10 per cent, respectively, of Adjusted Net Bank Credit (ANBC) or credit equivalent of
off-balance sheet exposure, whichever is higher, as hitherto.
ii. Agriculture: Distinction between direct and indirect agriculture is dispensed with.
iii. Bank loans to food and agro processing units will form part of Agriculture.
iv. Medium Enterprises, Social Infrastructure and Renewable Energy will form part of
priority sector.
v. A target of 7.5 per cent of ANBC or credit equivalent of off-balance sheet exposure,
whichever is higher, has been prescribed for Micro Enterprises.
vi. Education: Distinction between loans for education in India and abroad is dispensed with.
vii. Micro Credit ceases to be a separate category under priority sector.
viii. Loan limits for housing loans qualifying under priority sector have been revised.
ix. Priority Sector assessment will be monitored through quarterly and annual statements.

(RBI/2017-18/175 - DCBR.BPD (PCB).Cir.No.07/09.09.002/2017-18 dated May 10, 2018)

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=11274

6. Encouraging formalisation of MSME sector

It has now been decided to temporarily allow banks and NBFCs to classify their exposure,
as per the 180 days past due criterion, to all MSMEs, including those not registered under
GST, as a ‘standard’ asset, subject to the following conditions:

i. The aggregate exposure, including non-fund based facilities, of banks and NBFCs to the
borrower does not exceed ₹ 250 million as on May 31, 2018.
ii. The borrower’s account was standard as on August 31, 2017.
iii. The payments due from the borrower as on September 1, 2017 and falling due thereafter
up to December 31, 2018 were/are paid not later than 180 days from their original due
date.
iv. In respect of dues payable by GST-registered MSMEs from January 1, 2019 onwards, the
180 days past due criterion shall be aligned to the extant IRAC norms in a phased manner.
However, for MSMEs that are not registered under GST as on December 31, 2018, the

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asset classification in respect of dues payable from January 1, 2019 onwards shall
immediately revert to the extant IRAC norms.

(RBI/2017-18/186 - DBR.No.BP.BC.108/21.04.048/2017-18 dated June 6, 2018)

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=11289

7. Priority Sector Lending – Targets and Classification

With a view to bringing convergence of the Priority Sector Lending guidelines for housing
loans with the Affordable Housing Scheme, and to give a fillip to low-cost housing for the
Economically Weaker Sections and Low Income Groups, the housing loan limits for
eligibility under priority sector lending will be revised to ₹ 35 lakh in metropolitan centres
(with population of ten lakh and above), and ₹ 25 lakh in other centres, provided the
overall cost of the dwelling unit in the metropolitan centre and at other centres does not
exceed ₹ 45 lakh and ₹ 30 lakh, respectively.

4. Furthermore, the existing family income limit of ₹.2 lakh per annum, prescribed under
Para 10.4 of the Master Direction, for loans to housing projects exclusively for the purpose
of construction of houses for Economically Weaker Sections (EWS) and Low Income
Groups (LIG), is revised to ₹.3 lakh per annum for EWS and ₹.6 lakh per annum for LIG,
in alignment with the income criteria specified under the Pradhan Mantri Awas Yojana.

(RBI/2017-18/203 - FIDD.CO.Plan.BC.22/04.09.01/2017-18 dated June 19, 2018)

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=11308
8. Master Circular – Lead Bank Scheme
Issued to all the SLBC Convener Banks/Lead Banks vide FIDD.CO.LBS.BC.
No.2/02.01.001/2018-19 dated July 02, 2018.
https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=11321
9. Master Circular- Credit Facilities to Minority Communities addressed
to All Scheduled Commercial Banks & Small Finance Banks (Excluding RRBs
and Foreign banks with less than 20 branches)
FIDD.GSSD.BC.No.01/09.10.01/2018-1vide July 02, 2018.
https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=11323
10. Master Circular on SHG-Bank Linkage Programme issued to all
Scheduled Commercial Banks
Issued vide FIDD.FID.BC. No.04/12.01.033/2018-19 dated July 02, 2018.
https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=11320

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11. Master Circular - Kisan Credit Card (KCC) Scheme

Addressed to All Scheduled Commercial Banks (including Small Finance Banks and
excluding RRBs) vide FIDD.CO.FSD.BC. No.6/05.05.010/2018-19 dated July 4, 2018 The
scheme provides broad guidelines to banks for operationalizing the KCC scheme.
Implementing banks will have the discretion to adopt the same to suit institution/location
specific requirements.
https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=11325

12. Priority Sector Lending - Targets and Classification: Lending to non-

corporate farmers – System wide average of last three years

The applicable system wide average figure for computing achievement under priority
sector lending for the FY 2018-19 is 11.99 percent.

(RBI/2018-19/15 - FIDD.CO.Plan.BC 07/04.09.01/2018-19 dated July 12, 2018)

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=11333