On June 16, 2025, the RBI issued a Master Circular – Credit Facilities to Scheduled Castes (SCs) & Scheduled Tribes (STs). It consolidates earlier guidelines and lays out clear steps for banks to improve access to loans for SC/ST borrowers. Key measures include: special credit reservation under government schemes, priority lending in high SC/ST population areas, upfront subsidies, faster application decisions, and dedicated monitoring cells. For fintechs, this means aligning loan processes, data reporting, and product design to these inclusion targets.
Why This Circular Now?
Financial inclusion is a national priority, but access to credit remains uneven, particularly for historically disadvantaged communities like SCs and STs.
While there have been multiple schemes, like the Differential Rate of Interest Scheme or Credit Enhancement Guarantee Scheme for Scheduled Castes, implementation has been inconsistent. Delays in loan approvals, lack of targeted outreach, and weak monitoring have left many eligible borrowers underserved.
The RBI’s 2025 Master Circular brings these scattered rules into one place, with operational clarity for banks and lenders. This is about closing the last-mile gap – ensuring that targeted credit support actually reaches the intended communities, in a timely and efficient manner.
Key Highlights of the RBI Master Circular
Here’s what the new circular mandates, broken down into simple points:
1. Coordinated Efforts via District-Level Committees
- Banks will work with District Level Consultative Committees (DLCCs) and government agencies to align credit priorities for SC/ST borrowers.
- District Industries Centres (DICs) will help promote self-employment schemes for these communities.
- This moves lending decisions closer to local realities, making them more responsive.
2. Targeted Outreach in High SC/ST Population Areas
- Villages and urban localities with a significant SC/ST population will receive special focus in lending programs.
- Regular policy reviews will ensure credit products are accessible and relevant to these communities.
3. Stronger Institutional Support
- Banks must actively support borrowers through:
- Upfront subsidy release to eligible SC/ST applicants (instead of delayed disbursement after loan processing).
- Institutional support to the National Scheduled Tribes Finance & Development Corporation (NSTFDC) and the National Scheduled Castes Finance & Development Corporation (NSFDC).
- Upfront subsidy release to eligible SC/ST applicants (instead of delayed disbursement after loan processing).
- Loan rejections for SC/ST applicants will be escalated for decision at a higher level, reducing bias and oversight issues.
4. Reserved Credit in Key Government Schemes
The RBI explicitly lists schemes where SC/ST reservations apply:
- Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM)
- Differential Rate of Interest (DRI) Scheme
- Credit Enhancement Guarantee Scheme for Scheduled Castes (CEGSSC)
Banks must ensure these reservations are honored and monitored.
5. Monitoring Cells for SC/ST Credit Flow
- Special monitoring units within banks will track lending performance for SC/ST borrowers.
- Data will feed into State Level Bankers’ Committees (SLBCs) for quarterly review.
6. SLBC Oversight
- The SLBC will consolidate data, track progress, and recommend corrective measures.
- Representation from government bodies and development corporations ensures multi-stakeholder accountability.
7. Mandatory Data Reporting
- Banks must report SC/ST lending data under the Priority Sector Lending (PSL) framework.
- Timely and accurate reporting will allow RBI and SLBCs to identify gaps and address them promptly.
Example in Practice: If a fintech-powered NBFC is lending in rural Jharkhand, where SC/ST population is high, it will need to:
- Tag SC/ST borrowers in its system,
- Ensure products align with DRI Scheme norms,
- Disburse subsidies upfront, and
- Submit SC/ST loan data in PSL reports.
Impact on Fintechs & Startups
The circular isn’t just a bank compliance document – it directly impacts fintech lenders, NBFCs, and neo-banks working in inclusive finance.
1. Product & Underwriting Adjustments
- Loan application flows should now flag SC/ST applicants and automatically apply relevant scheme benefits.
- Algorithms can be tuned to preferentially route eligible borrowers through subsidized credit paths.
2. Subsidy Integration
- APIs should be designed to handle instant subsidy credit into borrower accounts.
- This requires coordination with government subsidy disbursement systems.
3. Higher-Level Review for Rejections
- Any SC/ST loan application rejection should trigger an escalation protocol in the loan origination system (LOS) to a senior credit officer.
- For fintechs, this might mean adding a manual override step in an otherwise automated workflow.
4. Reporting & Data Tagging
- PSL reports must clearly tag SC/ST loans.
- Data structures should be updated so that borrower community classification is captured, verified, and reported without manual intervention.
5. Partnership Opportunities
- Fintechs can partner with NSTFDC and NSFDC to co-lend or originate loans for their target audience, backed by institutional support.
6. Compliance Risks
- Missing the required data submission deadlines or failing to apply scheme benefits can trigger RBI scrutiny.
- Transparent borrower communication will be key, especially on subsidies and reserved credit lines.
Action Plan for Fintech Founders & Product Teams
Here’s what you should be doing now:
- Review Your Loan Products: Ensure they comply with DRI Scheme, DAY-NRLM, and CEGSSC rules where applicable.
- Map SC/ST Coverage: Use census and local government data to identify high SC/ST density areas for targeted campaigns.
- Update Your LOS & LMS: Add SC/ST tagging, subsidy disbursement modules, and escalation rules for rejections.
- Train Teams: Make sure your customer service, credit, and sales teams understand these guidelines.
- Integrate with Monitoring Cells: If partnering with banks, ensure your data feeds into their SC/ST monitoring systems.
Deadline
The circular is effective immediately from June 16, 2025. Banks and fintech partners need to be operationally compliant from day one, as this is a consolidation of existing measures, not a new policy requiring long transition.
Conclusion
The RBI’s Master Circular isn’t reinventing the wheel – it’s tightening the bolts. By consolidating and clarifying the rules, it removes ambiguity and puts responsibility squarely on lenders to make SC/ST financial inclusion real, measurable, and enforceable.
For fintechs, this is a chance to differentiate on inclusivity – designing products that don’t just meet compliance, but actually build trust and economic opportunity in historically underserved communities.
BeFiSc can help you get there faster by translating regulatory mandates into actionable product changes, building compliance-ready loan origination and reporting workflows, and ensuring your systems can track, report, and optimise SC/ST lending in line with RBI’s requirements. The winners will be those who merge tech-enabled efficiency with policy-aligned social impact, and BeFiSc is here to make that possible.
