All scheduled commercial banks have to follow priority sector advance’s sub-category advances to Industries Sector guidelines, including priority sector advances guidelines.
Domestic scheduled commercial banks and foreign banks with 20 branches and above have to do a minimum of 7.5% Industrial Sector Advances as Priority Sector Advances of Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher. Foreign banks with 20 branches and above have to accomplish the industries sector above set by the Reserve Bank of India after 2018 after review in 2017. In this, Government financial inclusion schemes like start-ups India, Stand up India, Pradhan Mantri Jan Dhan Yojana (PMJDY), etc., are included.
Advances to the industries sector have been classified as mentioned below,
Micro, Small, and Medium Enterprises
Manufacturing and Service Enterprises:
Manufacturing Enterprises engaged in the manufacture or production of goods for any industry and Enterprises rendering Services are defined in the Micro, Small, and Medium Enterprises category based on investment in Plant & Machinery/equipment and Annual Turnover as per Revised Classification applicable w.e.f 1st July 2020 as mentioned below,
| Classification | Manufacturing Enterprises and Enterprises rendering Services |
|---|---|
| Micro | Investment in Plant and Machinery or Equipment - Not more than Rs.1 crore and Annual Turnover - Not more than Rs.5 crore |
| Small | Investment in Plant and Machinery or Equipment - Not more than Rs.10 crore and Annual Turnover - Not more than Rs.50 crore |
| Medium | Investment in Plant and Machinery or Equipment - Not more than Rs.50 crore and Annual Turnover - Not more than Rs.250 crore |
Khadi and Village Industries Sector (KVI):
The sub-target for advances to Khadi and Village Industries Sector is 7% or 7.5 % prescribed for Micro Enterprises under the priority sector.
Other Finance to MSMEs:
- Advances to the organization involved in accommodating the decentralized sector in the supply of inputs to and marketing of outputs of a skilled worker in a particular trade, village, and cottage industries.
- Advances to co-operatives of producers in accommodating the decentralized sector like a skilled worker in a particular trade, village, and cottage industries.
- Loans sanctioned by banks to Micro-finance Institutions (MFIs) for lending to the MSME sector.
- Credit outstanding under General Credit Cards (including skilled workers in a particular trade, Laghu Udyami Card, Swarojgar Credit Card, Weaver’s Card, etc.) is in existence and catering to the non-farm entrepreneurial credit needs of individuals).
- Overdrafts extended by banks up to Rs.5,000/- under Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts provided the borrower’s household maximum annual income of Rs.1,00,000/- for rural areas and Rs.1,60,000/- for non-rural areas after April 8, 2015. These overdrafts qualify as an achievement of the target for lending to Micro Enterprises.
- Present outstanding deposits with SIDBI and MUDRA Ltd. on account of the priority sector are shortfalls.
Export Credit
Domestic scheduled commercial banks and foreign banks with 20 branches and above have to do incremental export credit over the corresponding date of the preceding year, up to 2% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher with effect from 1st April 2015 subject to maximum sanction limit of Rs.25.00 crores per borrower to units having maximum turnover of Rs.100.00 crores.
Foreign banks with 20 branches and above have to do incremental export credit over the corresponding date of the preceding year, up to 2% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher with effect from 1st April 2017 and Foreign banks with less than 20 branches have to do export credit up to 32% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher.
Dr. Utkarsh Amaravat is a banker with vast experience in retail credit. He holds a B.E. Mechanical and MBA Marketing degree from Gujarat Technological University and a Ph.D. in management (Credit Risk Management) from Sardar Patel University. He has mainly experience in sales and processing of credit proposals. Sales/Marketing, Relationship Management, Credit, and Risk Management, including research work are vital domains for him.