RURAL CREDIT

1. The objective of the RRBs: To advance credit and other facilities, especially to small
& marginal farmers, agriculture laborers, artisans, and small entrepreneurs, in order to
develop agriculture, trade, commerce, industry, and other usual productive activities
in rural areas.

2. Agriculture credit:

PRODUCTION CREDIT INVESTMENT CREDIT

Production credit is for the production of Investment credit includes the broad
various crops, both food crops and cash spectrum of purchase of cultivable land to
crops agriculture machinery.
generally short-term mostly medium to long-term.

3. Priority-Sector lending:
Priority Sector Lending (PSL) Guidelines of the RBI have been reviewed frequently
in the last decade in tune with emerging national priorities and to bring a sharper
focus on inclusive development.
The guidelines were last reviewed in 2020; the latest updated version is of the 20th.
October 2022.
The revised guidelines aim to encourage and support environment-friendly lending
policies to help achieve Sustainable Development Goals. (SDGs)
It also considered the recommendations of ‘Internal Working Group to review
Agriculture Credit.
Priority sectors are sectors of focus as per the national perspective for the
development of the economy and enumerated by the RBI and set goals for lending by
banks.
The priority sector comprises- REESHAM
R- Renewable energy
E- export credit
E-education
S- social infrastructure
H- Housing
A- Agriculture
M- MSMEs

ANBC- Adjusted Net Bank Credit

CEOBE- Credit Equivalent of Off-Balance sheet Exposure

Categories Foreign Regional Small Other and

 banks with Rural Bank Finance foreign
less than 20 Banks banks with
branches 20 branches
and above
TOTAL 40% of A or 75% of A or 75% of A or 40% of
PRIORITY C, w/e higher, C, w/e higher C, w/e higher ANBC or
SECTOR out of which (max lending CEOBE, w/e
32% can be in to Medium higher
the form of Ent. Is 15%)
Export credit.
AGRICULTURE NA 18% of A or 18% of A or 18% of A or
C, w/e is C, w/e is C, w/e is
higher; w/w higher; w/w higher; w/w
10% for 10% for 10% for
SMFs SMFs SMFs
MICRO NA 7.5% of A or 7.5% of A or 7.5% of A or
ENTERPRISES C, w/e is C, w/e is C, w/e is
higher higher higher
ADVANCES TO NA 15% of A or 15% of A or 15% of A or
WEAKER C, w/e is C, w/e is C, w/e is
SECTIONS higher higher higher

4. ANBC: Adjusted Net Bank Credit

ANBC is a technical calculation of bank credit to decide the targeted lending under
Priority Sector Lending (PSL).
ANBC=total bank credit – rediscounting obtained + o/s deposits with RIDF for unachieved targets

5. CEOBE: Credit Equivalent of Off-Balance Sheet Exposure

Credit equivalent of OBE will depend on the Credit Conversion Factor (CCF) of that
exposure.
CCF of Bank Guarantees, general guarantees like stand-by letter of credit and
financial guarantee are 100%
CCF of Performance Guarantee is 50%
CCF of OBE depends on the cash collaterals held for such exposure.

6. Farm Credit:
Loans to individual farmers for-
i. Crop loans including loans for traditional or non-traditional plantations,
horticulture, and allied activities.
ii. Medium and long-term loans for agriculture and allied activities.
iii. Loans for pre and post-harvest activities like spraying, harvesting, grading,
and transporting their own farm produce.
iv. Loans to distressed farmers indebted to non-institutional lenders.
v. Loans under Kisan Credit Card Scheme.
 vi. Small and marginal farmers for purchase of land for agriculture.
vii. Loans against pledge/hypothecation of agricultural produce for a period not
exceeding 12 months subject to limit up to 75 lakhs against Negotiable
Warehouse Receipt (NWR) and up to 50 lakhs against warehouse receipts
other than NRW.

7. Agriculture Infrastructure:
Loans for agriculture infrastructure will be subject to an aggregate sanctioned limit of
100 crores PER BORROWER from the ENTIRE BANKING SYSTEM.
i. Loans for construction of storage facility (warehouse, market yards, godowns)
including cold storage units/cold storage chains to store agricultural produce/
products.
ii. Soil conservation and watershed development
iii. Plant tissue culture and seed production, production of bio-pesticides, bio-
fertilizers, and vermicomposting.

8. Small and Marginal Farmers:

i. Marginal Farmers- with landholding up to 1 hectare
ii. Small Farmers- landholding of more than 1 hectare and up to 2 hectares
iii. Landless agricultural labourers, tenant farmers, oral lessees, and sharecroppers
with their share of landholding within the limits prescribed for SMFs.
iv. Loans up to 2 lakhs for individuals solely engaged in allied activities without
any accompanying landholding criteria.

9. Self Help Groups:

Small groups, formal/informal of individuals promoting the habit of savings among
members. These savings are then lent to members for income generating purposes,
PANCHASUTRA-
i. Conduct of regular group meetings
ii. Regular savings within the group
iii. Internal lending based on the demand of members
iv. Timely repayment of loans
v. Maintenance of proper books of accounts.
SHGs normally consist of 10-20 members.
10. Joint Liability group:
 Informal group of individuals coming together for the purpose of availing
bank loan either singly, or through the group against mutual guarantee in order
to engage in similar type of economic activities.
 JLGs basically are Credit groups of small/marginal/tenant farmers/ asset less
poor who do not have proper title of their farmland.
 A JLG would normally have between 4 and 10 members.

11. Kisan Credit Card:

Under this scheme, farmers can avail collateral free loans up to 1 lakh. Quantum of
loan for the 1st year is assessed based on
scale of finance + 10% of post-harvest expenses + 20% limit for repair and
maintenance.
4 subsequent years- based on 10% increase in scale of finance per year.

GoI interest subvention @3% for loans up to 3 lakhs with Rate of interest not
exceeding 7% p.a. on prompt repayment of loans.