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:
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.