RBI Master Circular on Credit Facilities to SCs and STs (October 2026): What Banks Must Do

On 1 October 2026, the Reserve Bank of India issued Master Circular No. RBI/2026-27/272 on credit facilities to Scheduled Castes (SCs) and Scheduled Tribes (STs). The circular is addressed to all Scheduled Commercial Banks, including Small Finance Banks, and consolidates the RBI instructions on the subject from the 21 circulars listed in its Appendix.

Quick Reference

What Changed?

The Master Circular states that it consolidates the circulars issued by the Reserve Bank on the subject till date. It sets out seven numbered parts covering planning, the role of banks, SC/ST Development Corporations, reservations under major Centrally Sponsored Schemes, CEGSSC, monitoring and review, and reporting requirements. The circular itself does not state a revised numerical threshold, a new compliance deadline or a penalty.

Why Does This Master Circular Matter?

The Appendix identifies the historical circulars consolidated into RBI/2026-27/272, including circulars carrying DBOD and RPCD reference numbers. The Master Circular brings the instructions on SC/ST credit facilities together in one document and records the earlier circulars in its Appendix. It also contains operational provisions concerning deposits, subsidy release and the handling of loan rejections under government programmes.

Who Must Comply With the Master Circular?

The source does not carve out any category of Scheduled Commercial Bank. The source also does not say whether Regional Rural Banks or co-operative banks are covered, because they are not among the addressees.

What Does the Master Circular Require? Provision-by-Provision Analysis

The circular opens by directing banks to "take the measures indicated below to step up their advances to SCs/STs". The seven parts follow.

1. Planning Process

• DLCCs (para 1.1): District Level Consultative Committees under the Lead Bank Scheme "should continue to be the principal mechanism of co-ordination" between banks and development agencies. District credit plans by Lead Banks should clearly indicate the linkage of credit with employment and development schemes.
• District Industries Centres (para 1.2): Banks have to establish closer liaison with these centres, which promote self-employment.
• Block-level weightage (para 1.3): A certain weightage is to be given to SCs/STs in planning. Credit planning should be weighted in their favour, special bankable schemes should be drawn up, and banks should consider loan proposals "with utmost sympathy and understanding".
• Lending procedures (para 1.4): Banks should periodically review procedures so that loans are sanctioned in time, are adequate and production-oriented, and generate incremental income to make them self-liquidating.
• Focus areas (para 1.5): While formulating Block/District Credit Plans, special focus "may be given" to villages with sizeable SC/ST populations and to localities (bastis) where these communities are concentrated. The wording is "may", so this is permissive rather than mandatory.

2. Role of Banks

• Assistance with forms (2.1): Bank staff "may help" borrowers fill up forms and complete formalities so that credit is available within a stipulated period from receipt of applications. The source does not specify the period.
• Awareness and meetings (2.2): Banks should create awareness through brochures, field-staff visits and similar means. Banks should advise branches to organise meetings, more frequently, exclusively for SC/ST beneficiaries to understand credit needs and incorporate them in the credit plan.
• Internal circulation (2.3): RBI/NABARD circulars should be circulated among staff for compliance.
• No insistence on deposits; subsidy (2.4): Banks should not insist on deposits while considering loan applications from SC/ST borrowers under Government-sponsored poverty alleviation or self-employment programmes. Banks must also ensure that applicable subsidy is not held back while releasing the loan component until full repayment of bank dues. The circular states that non-release of subsidy upfront amounts to under-financing and hampers asset creation and income generation.
• National corporations (2.5): The National Scheduled Tribes Finance & Development Corporation and the National Scheduled Castes Finance & Development Corporation function under the Ministry of Tribal Affairs and the Ministry of Social Justice & Empowerment respectively. Banks should advise branches and controlling offices to render all necessary institutional support.
• Priority sector status (2.6): Loans to State Sponsored Organisations for SCs/STs, for the specific purpose of purchasing and supplying inputs and/or marketing the outputs of their beneficiaries, are eligible for priority sector classification.
• Rejection at a higher level (2.7): Rejection of SC/ST loan applications under government programmes "should be done at the next higher level instead of at the branch level", and reasons must be clearly indicated.

3. Role of SC/ST Development Corporations

The Government of India has advised all State Governments that SC/ST Development Corporations can consider bankable schemes and proposals for bank finance. This part records a government advisory and does not itself place a direct obligation on banks.

4. Reservations Under Major Centrally Sponsored Schemes

The circular notes that credit under these schemes is monitored by RBI and that each has a "significant reservation/relaxation" for SC/ST members.

DAY-NRLM (4.1). DAY-NRLM, previously known as NRLM, was launched by restructuring the erstwhile Swarnajayanti Gram Swarozgar Yojana. It aims to ensure that 50% of beneficiaries are SCs/STs. The circular directs readers to the Master Circular on DAY-NRLM, as updated from time to time, for details.

Differential Rate of Interest (DRI) Scheme (4.2). Banks provide finance up to ₹15,000 at a concessional interest rate of 4 per cent per annum to weaker sections for productive and gainful activities. Banks have been advised to grant eligible SC/ST borrowers not less than 2/5th (40 percent) of total DRI advances. Two SC/ST-specific relaxations apply:

• The land-holding eligibility criteria under DRI (not more than 1 acre of irrigated land and 2.5 acres of unirrigated land) are not applicable to SCs/STs.
• SC/ST members satisfying the scheme's income criteria can also avail of a housing loan up to ₹20,000 per beneficiary, over and above the individual loan of ₹15,000.

5. Credit Enhancement Guarantee Scheme for Scheduled Castes (CEGSSC)

The Ministry of Social Justice & Empowerment launched CEGSSC on May 6, 2015 to promote entrepreneurship among Scheduled Castes through credit enhancement guarantees to Member Lending Institutions (MLIs). IFCI Ltd. is the designated Nodal Agency that issues the guarantee cover.

CEGSSC is for SC entrepreneurs only. The source does not extend it to STs.

6. Monitoring and Review

• Special cell (6.1): A special cell "should be set up" at the Head Office to monitor credit flow to SC/ST beneficiaries. It ensures implementation of RBI guidelines, collects data from branches, consolidates it and submits the requisite returns to RBI and Government.
• Periodic review and Board reporting (6.2): The Head Office should periodically review credit to SCs/STs based on branch returns. Any major gap or variation in credit flow on a year-to-year basis should be reported to the Board or a committee to which the Board has delegated powers.
• Quarterly review (6.3): Banks should review measures to enhance credit flow to SC/ST borrowers on a quarterly basis. The review should also consider progress in lending directly or through State Level SC/ST Corporations, based, among other things, on field visits by senior officers from the Head Office or Controlling Offices.
• SLBC (6.4): The SLBC Convenor bank should invite a representative of the National Commission for SCs/STs to SLBC meetings. The Convenor bank may also invite representatives of NSFDC and the State SC/ST Finance and Development Corporations.

7. Reporting Requirements

Data on advances to SCs and STs should be reported as prescribed in the Master Direction on Priority Sector Lending, as updated from time to time, within the stipulated time frames. The Master Circular itself does not prescribe a return format or due date. Related framework: Master Direction on Priority Sector Lending.

Binding Language: Which Provisions Are Mandatory and Which Are Advisory?

The circular mixes firm and soft wording, and the distinction matters when drafting internal policy.

CorpLawUpdates analysis: RBI uses "should" widely in supervisory circulars, and supervisory examination would normally test compliance with such language. Whether a particular "should" is treated as binding is a matter for the bank's compliance function to confirm against RBI's supervisory expectations. The source itself does not state any penalty or consequence of non-compliance.

Are There Any Exceptions or Exemptions?

The Master Circular does not provide any exemption for any category of Scheduled Commercial Bank. Exceptions that do appear operate at borrower level. SC/ST borrowers under DRI are exempt from the land-holding criteria, and SC/ST members satisfying the income criteria may take the ₹20,000 housing loan. The source does not set out penalties for non-compliance.

When Does the Master Circular Apply?

The Master Circular is dated October 1, 2026 and consolidates the RBI instructions listed in its Appendix. It does not specify a separate effective date, compliance deadline or transition period, and the circular itself does not state that a new obligation begins from a separate date.

What Is the Practical Impact for Banks?

In practice, this means that Head Office compliance, priority sector lending and financial inclusion teams should map their internal policies to the seven parts above. Policies built on the older DBOD or RPCD references need to cite the new document.

For compliance teams, the practical focus is mapping existing processes to the provisions of RBI/2026-27/272, including the handling of SC/ST loan applications under government programmes, applicable subsidy release, Head Office monitoring arrangements and quarterly review requirements.

The Master Circular itself does not prescribe a specific inspection checklist or state what documents an inspector must request. Any additional internal evidence requirements should therefore be treated as bank-level compliance practice rather than as a direct statement of the RBI circular.

Compliance Checklist

The checklist below summarises the requirements stated in RBI Master Circular RBI/2026-27/272. No separate compliance deadline or transition period is specified in the circular; the timing column therefore states only timings expressly identified in the source.

Frequently Asked Questions

What is the RBI Master Circular on credit facilities to SCs and STs?

It is RBI/2026-27/272, dated October 1, 2026, consolidating RBI's instructions to banks on credit facilities to Scheduled Castes and Scheduled Tribes. It lists the 21 circulars consolidated in its Appendix.

Which banks must follow it?

The circular is addressed to all Scheduled Commercial Banks, including Small Finance Banks.

Does the Master Circular introduce new rules?

The source does not identify any new rule. It states that it consolidates circulars issued by RBI on the subject till date.

When does the Master Circular come into force?

The source specifies no effective date. The circular is dated October 1, 2026.

Can a bank insist on a deposit from an SC/ST borrower?

No. Banks should not insist on deposits when considering loan applications from SC/ST borrowers under Government-sponsored poverty alleviation or self-employment programmes (para 2.4).

Who can reject an SC/ST loan application under a government programme?

Rejection should be done at the next higher level instead of at the branch level, and the reasons for rejection should be clearly indicated (para 2.7).

What share of DRI advances must go to SC/ST borrowers?

Banks have been advised to grant eligible SC/ST borrowers not less than 2/5th (40 percent) of total DRI advances. DRI finance is up to ₹15,000 at 4 per cent per annum (para 4.2).

What is the guarantee amount under CEGSSC?

Guarantee cover under the Credit Enhancement Guarantee Scheme for Scheduled Castes ranges from a minimum of ₹0.15 crore to a maximum of ₹5.00 crore. The tenure is up to 7 years or the repayment period, whichever is earlier (para 5).

How often must banks review SC/ST credit flow?

Banks should review measures taken to enhance the flow of credit to SC/ST borrowers on a quarterly basis (para 6.3). Major year-to-year gaps in credit flow should be reported to the Board or its delegated committee (para 6.2).

Where are SC/ST advances reported?

Data is reported as prescribed in the Master Direction on Priority Sector Lending, as updated from time to time, within the stipulated time frames (para 7).

CorpLawUpdates Analysis

This is a housekeeping circular with real operational content. The value to practitioners is in the consolidation: the instructions on deposits, subsidy, higher-level rejection, the Head Office cell and quarterly review now sit in one citable text. Two caveats are worth keeping in mind.

• Some figures reflect long-standing scheme parameters. The DRI limits of ₹15,000 and ₹20,000 and the 4 per cent rate are restated as they appear in the circular. Confirm whether the scheme is currently operational before relying on them for fresh lending decisions.
• Reporting is delegated to the Priority Sector Lending Master Direction. Teams should check the current version of that direction for formats and due dates.

Practitioners should also watch for any further RBI communication on the subject. The source does not indicate whether one is planned.

Appendix: Circulars Consolidated in the Master Circular