Bank Loan for Minorities

Reserve Bank of India has provided guidelines to banks on lending to priority sector and set targets. Priority sector lending target of 40 per cent of Adjusted Net Bank Credit (ANBC) or Credit Equivalent amount of Off-Balance Sheet Exposures (OBE), whichever is higher, as on March 31 of the previous year, has been mandated for lending to the priority sector by domestic scheduled commercial banks and foreign banks with 20 and above branches. Within the priority sector lending target, a sub-target of 10 per cent of ANBC or Credit Equivalent amount of OBE, whichever is higher, as on March 31 of the previous year, has been mandated for lending to weaker sections which includes, among others, persons from minority communities. In this article, we review the RBI's master circular on credit facilities to minority communities.

Lending to Minority Communities

In order to ensure that minority communities are treated in a fair and adequate manner, all commercial banks have been advised to ensure smooth flow of bank loan to minority communities. The following communities have been notified as minority communities by the Government of India, Ministry of Welfare:

Sikhs
Muslims
Christians
Zoroastrians
Buddhists
Jains

Special Cell and Nodal Officer

As per RBIs master circular, banks are required to create a special cell for lending to minority communities and designate an exclusive officer. The special cell must be headed by a bank officer holding the rank of Deputy General Manager or Assistant General Manager. In addition, banks are also required to have an Officer in each of the minority concentration districts who

exclusively look after the problems regarding the credit flow to minority communities. It would be the responsibility of such officer to arrange group meetings for their guidance for formulation of schemes suitable for the members of the minority communities.

Advances under DRI Scheme

Banks can route loans for minority communities under the DRI scheme of State Minority Finance/Development Corporation on the same terms and conditions as are applicable to loans routed through SC/ST Development Corporations.

National Minorities Development and Finance Corporation (NMDFC)

National Minorities Development and Finance Corporation (NMDFC) promotes economic and developmental activities for the backward sections amongst the minorities. NMDFC works as an apex body and channelises its funds to the beneficiaries through the State Minority Finance Corporation of the respective State/Union Territory Governments. Currently, NMDFC is operating a Margin Money Scheme. Under the scheme, bank finance under the scheme will be upto 60 percent of the project cost. The remaining amount of the project cost is shared by NMDFC, the State channelising agency and the beneficiary in the proportion of 25%, 10%, and 5%, respectively. Banks may implement the Margin Money scheme evolved by NMDFC.

Priority Sector Lending Target for Minorities

An important objective of the “Prime Minister’s New 15-Point Programme for the Welfare of Minorities” is to ensure that an appropriate percentage of the priority sector lending is targeted for the minority communities. Accordingly, all scheduled commercial banks are required to ensure that within the overall target for priority sector lending and the sub-target of 10 percent for the weaker sections, sufficient care is taken to ensure that minority communities also receive an equitable portion of the credit.

RBI Master Circular - Credit Facilities to Minority Communities

Back to Learn

Frequently Asked Questions

Common questions about Bank Loan for Minorities in India.

The Reserve Bank of India has mandated a sub-target of 10% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent amount of Off-Balance Sheet Exposures (OBE), whichever is higher, as on March 31 of the previous year, for lending to weaker sections, which includes persons from minority communities.

The communities notified as minority communities by the Government of India's Ministry of Welfare are Sikhs, Muslims, Christians, Zoroastrians, Buddhists, and Jains.

Banks are required to create a special cell for lending to minority communities, headed by an officer holding the rank of Deputy General Manager or Assistant General Manager. They must also have an officer in each minority concentration district to exclusively look after credit flow issues to minority communities.

Banks can route loans for minority communities under the DRI scheme of State Minority Finance/Development Corporations on the same terms and conditions as loans routed through SC/ST Development Corporations.

NMDFC promotes economic and developmental activities for backward sections among minorities. It works as an apex body and channels funds to beneficiaries through State Minority Finance Corporations. It currently operates a Margin Money Scheme where bank finance is up to 60% of the project cost.

Under the Margin Money Scheme, bank finance is up to 60% of the project cost. The remaining amount is shared by NMDFC (25%), the State channelizing agency (10%), and the beneficiary (5%).

An important objective of the Prime Minister's New 15-Point Programme for the Welfare of Minorities is to ensure that an appropriate percentage of priority sector lending is targeted for minority communities.

All scheduled commercial banks are required to ensure that within the overall priority sector lending target and the sub-target for weaker sections, sufficient care is taken to ensure that minority communities also receive an equitable portion of the credit.

The RBI's Master Circular on Credit Facilities to Minority Communities provides guidelines and instructions to banks on ensuring smooth flow of bank loans to minority communities, including targets, schemes, and policies related to lending to minority communities.

Lending to minority communities is important to ensure fair and adequate treatment of these communities and to promote their economic and developmental activities, as per the government's welfare programs and initiatives.