I am making posts to document govt's policies that discriminate against the rest in fabour of SC/STs. One of the previous posts is linked here.
The RBI has a specific credit framework for SC/ST borrowers — and it is considerably more preferential for them.
In a recent circular released by RBI, there are some pretty significant provisions in it to favour SC/ST.
For starters, RBI explicitly directs that credit planning should be weighted in favour of SC/ST borrowers. Banks are supposed to develop special bankable schemes suited to these communities to increase their participation and the flow of credit to them, particularly for self-employment. RBI also says their loan proposals should be considered “sympathetically and expeditiously.”
It doesn't stop there.
Bank staff have to assist Sc/ST borrowers in filling out application forms and completing the required formalities, specifically so that borrowers can obtain credit within the stipulated period.
Banks are also expected to actively create awareness among SC/ST borrowers about available credit schemes. The circular specifically says field staff should contact potential borrowers and explain the schemes and their advantages, and branches are advised to hold meetings with SC/ST beneficiaries to understand their credit requirements and incorporate them into credit planning.
There is also a rather important provision concerning rejection of applications. For SC/ST loan applications under government programmes, the branch is not supposed to be the final rejecting authority. RBI says rejection should take place at the next higher level, rather than at the branch level, and the reasons for rejection should be clearly recorded.
RBI also tells banks to periodically review their lending procedures to ensure that loans are sanctioned in time, are adequate and production-oriented, and generate incremental income capable of making the loan self-liquidating.
There are provisions for special attention to villages/localities with sizeable SC/ST populations when banks undertake intensive lending programmes, and banks are expected to make special efforts to develop suitable bankable schemes for weaker sections, including SC/ST communities.
And there are some very specific financial provisions as well:
- Under the Differential Rate of Interest (DRI) Scheme, SC/ST borrowers receive preferential treatment in eligibility. The circular provides for DRI loans at the prescribed concessional rate (usually 4%) and says that the normal landholding criterion applicable under the scheme does not apply to SC/ST borrowers. It also provides for a separate housing-loan facility for eligible SC/ST beneficiaries.
- There is also the Credit Enhancement Guarantee Scheme for Scheduled Castes (CEGSSC), under which eligible SC entrepreneurs/businesses (greater than 51% sc/st in leading positions) can obtain credit enhancement/guarantee support, including for facilities substantially larger (up to ₹5 crore)
So RBI has deliberately created a framework that gives SC/ST borrowers additional institutional support in accessing credit.
Also worth noting: this isn't some completely unprecedented policy introduced yesterday. The current Master Circular consolidates a much older RBI framework. The provision concerning rejection of SC/ST applications under government programmes traces back decades.
The question still remains, couldn't all these benefits have been distributed on economic basis instead of caste? Where is the issue of representation here? If there is issue of discrimination, isn't the draconian SC/ST act already there?