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RBI Releases Master Circular on Credit Facilities for Scheduled Castes (SCs) & Scheduled Tribes (STs)

The Reserve Bank of India (RBI) holds a pivotal role in shaping India’s financial landscape, with a crucial aspect of its mandate focusing on ensuring fair access to credit facilities, especially for marginalized communities such as Scheduled Castes (SCs) and Scheduled Tribes (STs). In light of the above, RBI has issued directions on Credit Facilities to SCs & STs to all Scheduled Commercial Banks (including Small Finance Banks) outlining steps to enhance lending to these communities.

The Key highlights of the Master Circular are as follows:

a) Planning Process:

• The District Level Consultative Committees formed under the Lead Bank Scheme shall remain the main mechanism of coordination between banks and development agencies in this regard.
• Closer liaison with District Industries Centers to be established to promote self-employment.
• Weightage should be given to SCs/STs at the block level in credit planning, with tailored schemes for self-employment.
• Banks should regularly evaluate their lending procedures and policies to ensure that loans are approved in a timely manner and contribute to productive activities that generate additional income to repay the loans.
• Special attention to be paid to villages or specific localities (bastis) that have a significant population of SC/ST communities while formulating credit plans.

b) Role of Banks:

Banks are instructed to raise awareness among the community and its own staff, help with the application process, not demand deposits when reviewing loan applications for Government-sponsored poverty alleviation schemes or self-employment programs, not withhold subsidy, render all the necessary institutional support. Further, loans provided to State-sponsored organizations for SCs/STs, specifically for the procurement and distribution of inputs or marketing outputs of the beneficiaries, would be eligible for priority sector classification. In addition, loan applications from SCs/STs under government programs should be rejected at a higher level than the branch, and clear reasons for rejection should be provided.

c) Role of SC/ST Development Corporations:

State Governments are encouraged to consider bankable proposals/schemes for bank finance from SC/ST Development Corporations.

d) Reservations for SC/ST beneficiaries:

1. Several schemes, such as the Deendayal Antyodaya Yojana (DAY-NRLM and DAY-NULM) and the Differential Rate of Interest (DRI) Scheme, have provisions for reservations aimed at benefiting SC/ST communities for providing credit facilities should be encouraged.

e) Credit Enhancement Guarantee Scheme for Scheduled Castes (CEGSSC):

1. This scheme provides a credit enhancement guarantee to Member Lending Institutions (MLIs) that offer financial assistance to SC entrepreneurs wherein SC entrepreneurs hold more than 51% shareholding and management control for the preceding 6 months. IFCI Ltd. extends this guarantee against loans provided by MLIs.
2. The guarantee cover offered by CEGSSC ranges from a minimum of ₹0.15 crore to a maximum of ₹5.00 crore.
3. This guarantee’s tenure extends up to a maximum of 7 years or the repayment period, whichever occurs earlier.

f) Monitoring and Review:

1. Special cells at bank Head Offices should monitor credit flow to SC/ST beneficiaries.
2. Periodic reviews of credit extended to SCs/STs should be conducted.
3. SLBC meetings should include representatives from SC/ST commissions and development corporations.

g) Reporting Requirements:

Data on advances to SCs/STs should be reported as per Priority Sector Lending guidelines.