Priority lending to Training centres & consultancy services registered as Micro or Small enterprise – RBI instructs banks

Priority Sector Lending – Categorisation of activities under service under the Micro Small & Medium Enterprises Development (MSMED) Act, 2006

Understand the broad CATEGORIES OF PRIORITY SECTOR,
(i) Agriculture (Direct and Indirect finance)
(ii) Small Enterprises (Direct and Indirect Finance)
(iii) Retail Trade
(iv) Micro Credit
(v) Education loans
(vi) Housing loans

Understand about MSMED from http://yehseeyes.blogspot.com/search?q=MSMED

It has been decided to include loans granted by banks in respect of following activities under Micro and Small (Service) Enterprises within the priority sector, provided such enterprises satisfy the definition of Micro and Small (Service) Enterprises in respect of investment in equipment (original cost excluding land and building and furniture, fittings and other items not directly related to the service rendered or as may be notified under the MSMED Act, 2006) (i.e. not exceeding Rs. 10 lakh and Rs. 2 crore respectively).

1. Consultancy Services including Management Services;
2. Composite Broker Services in Risk and Insurance Management;
3. Third Party Administration (TPA) Services for Medical Insurance Claims of Policy Holders;
4. Seed Grading Services;
5. Training-cum-Incubator Centre;
6. Educational Institutions;
7. Training Institutes;
8. Retail Trade;
9. Practice of Law, i.e. legal services;
10. Trading in medical instruments (brand new);
11. Placement and Management Consultancy Services; and
12. Advertising agency and Training centres

Accordingly, there will be no separate category for "Retail Trade" under priority sector. Loans granted by banks for Retail Trade [i.e. advances granted to retail traders dealing in essential commodities (fair price shops), consumer co-operative stores; and advances granted to private retail traders with credit limits not exceeding Rs. 20 lakh) would henceforth be part of the Small (Service) Enterprises.

The commercial banks may report such loans under the head "Total credit to Small Enterprises" in the half-yearly (Ad-hoc) [under 2 (a) and 2 (ii)] and yearly (final) [under 14, 15, 19, 20 and 21] return on priority sector advances.

For All Primary (Urban) Co-operative Banks (read this circular UBD.CO.BPD(PCB) Cir.No.50/09.09.001/2009-10 dated March  25, 2010)

Source: RBI/2009-10/164 RPCD.CO.Plan.BC. 24 /04.09.01/2009-10 dated 18th September 2009