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Reserve Bank of India
Date: Jul 01, 2011
Master Circular - Lending to Micro, Small & Medium Enterprises (MSME) Sector
RPCD.SME & NFS. BC. No. 09/06.02.31/2011-12
July 1, 2011


Certain types of funds deployment eligible as priority sector advances
2.1 Investments
2.1.1 Securitised Assets
Investments made by banks in securitised assets, representing loans to various categories of priority sector, shall be eligible for classification under respective categories of priority sector (direct or indirect) depending on the underlying assets, provided the securitised assets are originated by banks and financial institutions and fulfill the Reserve Bank of India guidelines on securitisation. This would mean that the bank's investments in the above categories of securitised assets shall be eligible for classification under the respective categories of priority sector only if the securitised advances were eligible  to be classified as priority sector advances before their securitisation.
2.1.2 Outright purchases of any loan asset eligible to be categorised under priority sector, shall be eligible for classification under the respective categories of priority sector (direct or indirect), provided the loans purchased are eligible to be categorised under priority sector; the loan assets are purchased (after due diligence and at fair value) from banks and financial institutions, without any recourse to the seller; and the eligible loan assets are not disposed of, other than by way of repayment, within a period of six months from the date of purchase.
2.1.3 Investments by banks in Inter Bank Participation Certificates (IBPCs), on a risk sharing basis, shall be eligible for classification under respective categories of priority sector, provided the underlying assets are eligible to be categorised under the respective categories of priority sector and are held for at least 180 days from the date of investment.
2.2 Scheme of Small Enterprises Financial Centres (SEFCs) :

As per announcement made by the Governor in the Annual Policy Statement 2005-06, a scheme for strategic alliance between branches of banks and SIDBI located in clusters, named as “Small Enterprises Financial Centres” has beenformulatedin consultation with the Ministry of SSI and Banking Division, Ministry of Finance, Government of India, SIDBI, IBA and select banks and circulated to all scheduled commercial banks on May 20,  2005 for implementation. SIDBI has so far executed MoU with 15 banks so far (Bank of India, UCO Bank, YES Bank, Bank of Baroda, Oriental Bank of Commerce, Punjab National Bank, Dena Bank, Andhra Bank, Indian Bank, Corporation Bank, IDBI Bank, Indian Overseas Bank, Union Bank of India, State Bank of India and Federal Bank). List of MSME  clusters covered by existing SIDBI branches is furnised in Annex II. 


Related LInks

SECTION - I : Micro, Small & Medium Enterprises Development (MSMED) Act, 2006

SECTION - IV : Common Guidelines / Instructions for Lending to MSME Sector



Annex III :List of MSME Clusters in India (identified by UNIDO)

Appendix : List of Circulars consolidated by the Master Circular

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Infrastructure & Industrial Development Department

Government of Uttar Pradesh,

First & Second Floor Block C,

Lok Bhawan,

Sarojini Naidu Marg,

Lucknow- 226 001. (U.P.)

Phone No:- 91-522-2226126/2238283/2239530

Fax No:- 91-522-2238255

Email :- iidcup.84@gmail.com

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