priority sector lending products

What are Priority sectors: Background

At a meeting of the National Credit Council held in July 1968, it was emphasised that commercial banks should increase their involvement in the financing of priority sectors, viz., agriculture and small scale industries. The description of the priority sectors was later formalised in 1972 on the basis of the report submitted by the Informal Study Group on Statistics relating to advances to the Priority Sectors constituted by the Reserve Bank in May 1971. Although initially there was no specific target fixed in respect of priority sector lending, in November 1974 the banks were advised to raise the share of these sectors in their aggregate advances to

the level of 33 1/3 percent by March 1979. Reserve Bank of India in August 2011 set up a Committee to re-examine the existing classification and suggest revised guidelines with regard to Priority Sector lending classification and related issues (Chairman: M V Nair). . Categories under priority sector: (i) Agriculture (ii) Micro and Small Enterprises (iii) Education (iv) Housing (v) Export Credit

Are you qualified for classification under Priority Sector

Agriculture: Loans to farmers engaged in Agriculture and Allied Activities, viz., dairy, fishery, animal husbandry, etc

Micro and Small Enterprises: Manufacturing sector

Enterprises:  Investment in plant and machinery

Micro Enterprises:   Do not exceed twenty five lakh rupees

Small Enterprises:  More than twenty five lakh rupees but does not exceed five crore rupees

Service Sector

Enterprises:  Investment in equipment

Micro Enterprises:   Does not exceed ten lakh rupees

Small Enterprises:  More than ten lakh rupees but does not exceed rupees two crores

Maximum loan cap of INR 5 crs to qualified Services sector customers would be classified under Priority Sector

Education: Loans to individuals for educational purposes including vocational courses upto INR 10 lakh for studies in India and INR 20 lakh for studies abroad.


Priority Sector


(i) Loans to individuals up to 25 lakh in metropolitan centres with population above ten lakh and 15 lakh in other centres for purchase/construction of a dwelling unit per family excluding loans sanctioned to bank’s own employees.

(ii) Loans for repairs to the damaged dwelling units of families up to 2 lakh in rural and semi- urban areas and up to 5 lakh in urban and metropolitan areas.

Export Credit:

Export credit extended by financial institutions would qualify under Priority Sector norms


What benefits can you avail under Priority sector lending

While there are several lending schemes for short, medium and long term extended by various financial institutions, with or without collaterals, the most preferred option is a loan against property. Financial institutions provide high loan to value and lower rate of interest on this product offering. Such offers differ from time to time and therefore we would request you to contact us for specific details, both with respect to qualification criteria as well as offers.

Disclaimer: The above note on Priority Sector Lending is basis our interpretation of the relevant excerpts from the notification issued by the Reserve Bank of India. ecreditIndia team does not take any responsibility or liability arising out of the same.