Loans to weaker section category explained

The weaker sections of our society are the socially backward/ minority communities at national level or the people belonging to economically low income group. Normally, such people may not easily get timely and adequate credit without the priority credit dispensation of RBI.  As per RBI’s priority sector approved plan, Banks have to achieve weaker section target of 10 percent of ANBC (Adjusted Net Banking Credit) or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher.

The Priority sector loans to the following category borrowers will be considered as Loans to ‘Weaker Sections’.

Small and marginal farmers: As per RBI definition, a farmer cultivating more than 1 hectare   up to 2 hectares(5 Acres)  and a farmer who is cultivating agriculture land up to 1 hectare (2.5 Acres) are respectively called Small and marginal farmers. For the purpose of priority sector advance that includes landless agriculture labourers, tenant farmers or a lessee and share croppers whose share of land holding is within the above limits.  The loan granted to a farmer for investment up to Rs.50000/- for allied activities irrespective of size of the land holding is considered as advances to small and marginal farmer under weaker section.

Besides small and marginal farmers the advance made to Artisans, village and cottage industries where individual credit limit does not exceed Rs.1 lakh is classified as advances to weaker section category. DRI Loans, loans to Self Help Groups, loans to SC/STs, persons with disabilities, loans to minority Communities such as Muslims, Christians, Sikhs, Jains, Buddhist, Parsis (The Muslims in J&K, and Lakshadweep, Sikhs in Punjab, the Christians in Nagaland, Mizoram and Meghalaya who are minority population at national level and majority population in the states are not considered as minority category in those states), Beneficiaries of Government sponsored schemes such as NRLM, NULM and SRMS are also considered as weaker section.

Overdrafts up to Rs.5000/- under Pradhan Mantri Jan-DhanYojana (PMJDY) accounts wherein  the borrowers’ household annual income does not exceed Rs.100,000/- for rural areas and Rs.1,60,000/- for non-rural areas, loan granted to distressed farmer to clear his/her indebtedness to non-institutional lender, other distressed persons to whom loans are granted to prepay the loan amount to the non-institutional lenders up to Rs.1 lakh per borrower and individual women beneficiaries up to Rs.1 lakh per borrower is considered as loan to weaker section.

We may sum up that Priority sector loans to the following borrowers will be considered as loans under Weaker Sections category:
No.     Category
1     Small and Marginal Farmers
2     Artisans, village and cottage industries where individual credit limits do not exceed ₹ 1 lakh
3     Scheduled Castes and Scheduled Tribes
4     Self Help Groups
5     Distressed farmers indebted to non-institutional lenders
6     Distressed persons other than farmers, with loan amount not exceeding ₹ 1 lakh per borrower to prepay their debt to non-institutional lenders
7     Women
8     Persons with disabilities
9     Overdrafts upto ₹ 5,000/- under Pradhan Mantri Jan-Dhan Yojana (PMJDY) accounts, provided the borrowers’ household annual income does not exceed ₹ 100,000/- for rural areas and ₹ 1,60,000/- for non-rural areas
10     Minority communities as may be notified by Government of India from time to time
Note: In States, where one of the minority communities notified is, in fact, in majority, item (10) will cover only the other notified minorities. These States / Union Territories are Jammu & Kashmir, Punjab, Meghalaya, Mizoram, Nagaland and Lakshadweep.