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Role of Banking Codes and Standard Board of India (BCSBI) for MSEs

  1. The Banking Codes and Standard Board of India (BCSBI) constituted a Working Group comprising members from select banks, Indian Banks Association, Rural Planning & Credit Department of Reserve Bank of India to formulate a Banking Code for SME Customers. 
  2. The Banking Codes and Standard Board of India (BCSBI) has formulated a Code of Bank's Commitment to Micro and Small Enterprises.
  3. This is a voluntary Code, which sets minimum standards of banking practices for banks to follow when they are dealing with Micro and Small Enterprises (MSEs) as defined in the Micro Small and Medium Enterprises Development (MSMED) Act, 2006.

Priority Sector Lending:Priority sector lending include only those sectors as part of the priority sector, that impact large sections of the population, the weaker sections and the sectors which are employment-intensive such as agriculture, and Micro and Small enterprises. 


Priority Sector: Priority sector refers to those sectors of the economy which may not get timely and adequate credit in the absence of this special dispensation.

Typically, these are small value loans to farmers for agriculture and allied activities, micro and small enterprises, poor people for housing, students for education and other low income groups and weaker sections.

Categories under priority sector

  1. Agriculture
  2. Micro and Small Enterprises
  3. Education
  4. Housing
  5. Export Credit
  6. Others
Loan limit for education under priority sector: Loans to individuals for educational purposes including vocational courses upto `10 lakh for studies in India and `20 lakh for studies abroad are included under priority sector.

Limit for housing loans under priority sector:
Loans to individuals up to `25 lakh in metropolitan centres with population above ten lakh and `15 lakh in other centres for purchase/construction of a dwelling unit per family excluding loans sanctioned to bank’s own employees.

Rate of interest for loans under priority sector:
The rate of interest on various priority sector loans will be as per RBI’s directives issued from time to time, which is linked to Base Rate of banks at present. Priority sector guidelines do not lay down any preferential rate of interest for priority sector loans.

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