This Master Circular dated August 2, 2022, has consolidated all the circulars issued by the RBI till date on credit facilities to minority communities. As per this Master Circular, the communities consisting of Sikhs, Muslims, Christians, Zoroastrians, Buddhists, Jains are considered as minority communities. The Master Circular also states that in cases of a partnership firm, if the majority of the partners belong to one or the other of the specified minority communities, advances granted to such partnership firms may be treated as advances granted to minority communities. If the majority beneficial ownership in a partnership firm belongs to a minority community, such lending can be classified as advanced to the specified communities.

1. Credit facilities to Minority Communities:

a. To ensure that minority communities are secure and have a fair and adequate measure, the benefits flowing from various government sponsored schemes, scheduled commercial banks (“Bank/ Banks”) that includes all banks excluding Regional Rural Banks (“RRBs”)and foreign banks, that are advised to ensure smooth flow of bank credit to minority communities.

b. The Government of India has forwarded a list of 121 minority concentration districts having at least 25% (Twenty-Five percent) minority population. Banks are thus advised to specially monitor the credit flow to minorities in these 121 districts thereby, ensuring that the minority communities receive a fair and equitable portion of the credit within the overall target of the priority sector. 

c. As per the Master Direction on Priority Sector Lending (“PSL”) dated September 04, 2020, a target of 40% (Forty percent) 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; for Small Finance Banks the target is 75% (Seventy Five percent) of their ANBC. Within this, a sub-target of 11.5% (Eleven and a half percent) of ANBC or Credit Equivalent amount of OBE, whichever is higher, as on March 31 of the previous year, has been mandated for financial year, 2022-23, for lending to weaker sections which includes persons from minority communities. 

2. Creation of a specified cell and designating an exclusive officer: 

a. Each bank should set up a special cell having a nodal officer holding the rank of Deputy General Manager or any other similar rank, in order to ensure smooth flow of credit to these minority communities

b. A ‘lead bank’ as per the Master Circular dated April 1, 2022, on the Lead Bank Scheme, is a public sector bank that discharges social responsibilities, and such a bank must concentrate on certain districts where it would act as the lead bank (“Lead Bank”).

c. The Lead Bank should have an officer who shall exclusively look after aspects in relation to credit assistance to minority communities in concerned districts.

d. The designated officer may be attached to the Lead Bank set up at the district level so as to receive guidance from Lead District Manager, who will be senior enough and have adequate experience for liaising effectively with the other credit institutions and government agencies and will also be working in close collaboration with the branch managers of other banks in the district. 

e. The name, designation and office address of the officer-in-charge of the Special Cell at Head Office and officer appointed by lead banks in the identified districts must be provided and they must look after the problems of minority communities exclusively.

3. Role of Lead Banks:

a. Lead banks of the Minority Concentration Districts must exercise a proactive role to ensure that the minority communities, particularly those who are poor, and illiterate have access to bank credit for taking up productive activities.

b. The Lead Banks in the 121 identified districts having concentration of minority communities may involve the State Minority Commission/Finance Corporation in the extension work including creating awareness, identification of beneficiaries, preparation of viable projects, provision of backward and forward linkages such as supply of inputs/marketing, recovery etc.

c. They may also collaborate with District Development Managers of NABARD/ NGOs/ Voluntary Organisations to reach the poor through Self-Help Groups.

d. The Convenor banks of the District Consultative Committees (“DCCs”), District Level Review Committees (“DLRCs”) and the State Level Bankers Committees should ensure that steps taken to facilitate the flow of credit to the minority communities and the progress made are reviewed regularly. 

4. Advances under the Differential Rate of Interest (“DRI”) Scheme:

a. Banks may route loans under the DRI scheme through State Minority Finance/ Development Corporation on the same terms and conditions as are applicable to loans routed through SC/ ST Development Corporations, subject to beneficiaries of the Corporations meeting the eligibility criteria and other terms as given in the scheme. 

b. Banks are to ensure proper maintenance of the register for timely sanction and disbursement of loan applications.

5. Monitoring:

a. Data on the credit that is extended to minority communities should be furnished to the RBI and to the Government of India, Ministry of Finance and Ministry of Minority Affairs on a half yearly basis at the end of March and September every year within one month from the end of each half year.

b. The Convenor banks of the DCCs in the identified minority concentrated districts should furnish the data on priority sector advances granted by banks to specified minority communities compiled by them in the prescribed format for the district under their lead responsibility. 

c. The progress made in regard to the flow of credit to the minority communities should be reviewed regularly at the meetings of the DCCs and the State Level Bankers Committees (“SLBCs”).

d. The Lead Banks in the minority districts must furnish the relevant extracts of the agenda notes and the minutes of the meetings of the DCCs and the respective SLBCs to the Union Ministry of Finance and the Ministry of Minority Affairs.

6. Training:

a. Necessary orientation is to be provided to officials and other staff. Banks must schedule lecture sessions as part of the relevant training programmes on rural lending, financing of priority sectors and poverty alleviation programmes.

b. The lead banks must sensitise and motivate the staff posted to identified districts through proper training to assist the minority communities under various credit schemes.

7. Publicity:

a. Banks must create publicity through various means about the anti-poverty programmes of the Government where there is large concentration of minority communities. Lead banks must create awareness among minority communities regarding credit facilities available from banks through appropriate measures which may include print media, TV channels and participating in setting up of stalls in the melas/fairs organized during the religious occasions by the minority communities.

8. National Minorities Development and Finance Corporation (“NMDFC”):

a. NMDFC promotes economic and developmental activities for the backward sections amongst the minorities. 

b. NMFDC works as an apex body and channelizes its funds to the beneficiaries through the State Minority Finance Corporation of each State/Union Territory. Banks may also implement the schemes evolved by NMDFC.

9. Prime Minister’s New 15 Point Programme (“New Programme”) for the Welfare of Minorities:

a. An objective of the New Programme is to ensure that an appropriate percentage of the priority sector lending is targeted for the minority communities and that the benefits of various government sponsored schemes reach the under-privileged, which includes the disadvantaged sections of the minority communities.

b. The New Programme is to be implemented by the Central Ministries/ Departments concerned through State Governments/ Union Territories and envisages location of certain proportion of development projects in minority concentration districts. 

c. All scheduled commercial banks are required to ensure that within the overall target for priority sector lending and the sub-target of 11.5 (Eleven and a half percent for the weaker sections for financial year, 2022-23, sufficient care is taken to ensure that minority communities also receive an equitable portion of the credit. Lead banks have been advised to keep this requirement while preparing District Credit Plans. 

Argus View:

This Master Circular is set to assist scheduled banks in providing credit facilities to minority communities and also, provide for a framework that will determine the requirements, training, publicity, credit facilities and governance framework that is needed in order to fast-track the process of credit provision for minority communities in an organized manner. As this also provides for reviewing of the work that the banks are undertaking such as maintenance of registers, it will ensure accountability of the banks in the process of credit provision to minority communities, thus benefitting them in the long run.

Please find a copy of the Master Circular, here. 

This update has been contributed by Prashanth Sabeshan (Partner) and Vallari Dronamraju (Associate).

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