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All about PRIORITY SECTOR | All about PRIORITY SECTOR| CURRENT TARGETS IN PRIORITY SECTOR LENDING

Priority Sector Lending

Priority sector was first properly defined in 1972, af ter the National Credit Council emphasized a few years back that there should be a larger involvement of the com mercial banks in the priority sector. First of all in 1974, the banks were given a target of 33.33 % as share of the priority sector in the total bank credit. This was later revised on the recommendation of the Dr. K S Krishnaswamy committee and the target was raised to 40%. The latest working group on this segment was C S Murthy Committee in 2007, on whose recommenda tions, RBI revised the guidelines.

All about PRIORITY SECTOR

WHAT IS PRIORITY SECTOR ?

Broadly, priority sector includes the Agricul e Finance, Small Enterprises, Retail Trade, Micro C Education
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All about PRIORITY SECTOR | All about PRIORITY SECTOR| CURRENT TARGETS IN PRIORITY SECTOR LENDING

Loans and housing loans. The defini . ca e but from the Dr. K S Krishnaswamy Committee. s pe Reserve Bank of India, Priority sector includes.

1. Agriculture 2. Small scale industries (inclUding setting up at . al estates) 3. Small road andwater transport operators (owning up 10 vehicles). 4. Small business (Original cost of equipment used for business not to exceed Rs 20 lakh) 5. Retail trade (advances to private retail traders up to Rs 10lakh) 6. Professional and self-employed persons (borrowing limit not exceeding Rs 10 lakh of which not more than Rs 2 lakh for working capital; in the case of qualified medical practitioners setting up practice in rural areas, the limits are Rs 15 lakh and Rs 3 lakh respectively and purchase of one motor vehicle within these limits can be included under priority sector) 7. State sponsored organizations for Scheduled Castes/Scheduled Tribes 8. Education (educational loans granted to individuals by banks) 9. Housing [both direct and indirect - loans up to Rs 5 Lakhs (direct loans upto Rs 10 lakh in urban/ metro politan areas), Loans upto Rs1 lakh and Rs 2 lakh for repairing of houses in rural/ semi-urban and urban ar eas respectively]. 10. Consumption loans (under the consumption credit scheme for weaker sections) 11. Micro-credit provided by banks either directly or through any intermediary; Loans to self help groups(SHGs) / Non Governmental Organizations (NGOs) for on lending to SHGs 12. Loans to the software industry (having credit limit not exceeding Rs 1 crore from the banking system) 13. Loans to specified industries in the food and agro-pro c essing sector having investment in plant and ma c hinery up to Rs 5 crore. 14. Investment by banks in venture capital (venture capi t al funds/ companies registered with SEBI)

CURRENT TARGETS IN PRIORITY SECTOR LENDING

At present the domestic banks have to disburse 40% of the Net Bank Credit to Total Priority sector, out of which 18% should be total agricultural advances. The Foreign banks have been given a target of 32% of the Net Bank Credit to priority sector, however, there is no lower limit fixed for agriculture.

WEAKER SECTIONS :
Under the above, the following have been defined by RBI have weaker sections of the society: ._ 1. Small and marginal farmers with land holding of 5 acres and less and landless laborers, tenant farmers and share croppers. 2. Artisans, village and cottage industries where individ ual credit limits do not exceed Rs. 50,000/3. Beneficiaries of Swarnjayanti Gram Swarojgar Yojana (SGSY) 4. Scheduled Castes and Scheduled Tribes 5. Beneficiaries of Differential Rate. of Interest (DRI) scheme 6. Beneficiaries under Swarna Jayanti Shahari Rojgar Yojana (SJSRY) 7. Beneficiaries under the Scheme for Liberation and Rehabilitation of Scavangers (SLRS). 8. Self Help Groups (SHGs)

RBI GUIDELINES for PRIORITY SECTOR :

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All about PRIORITY SECTOR | All about PRIORITY SECTOR| CURRENT TARGETS IN PRIORITY SECTOR LENDING

RBI keeps issuing guidelines for the Priority sector lending. Here are a few important points: The overall targetset by the RBI for the priority sector lending is 40% of the adjusted net bank credit (ANBC) out of which 18% is fixed for agriculture sector and 10% for weaker sections of the society. Target Credit to women beneficiaries is 5%. Banks are supposed to give acknowledgement for, loan applications received from weaker sections. The ap plication should be disposed off as follows: Loans up to Rs 25000 2 weeks Loans above Rs 25000 8-9 weeks For SSI Loans up to Rs 25000 2 weeks Rs 25000 up to 5,00,0004 weeks Above Rs 5 Lakh 8-9 weeks The loans applications of the priority sector can be rej ected by the branch manager provided the rejection is lat e r verified by the Divisional Manager / regional manager However, in case of SC/ SI, a branch manager can 1;10t reject the application. In this case, only a divisional man ager / regional manager can do so. Commercial banks have been advised to link the tenor of loans to Housing Finance Companies (HFCs) in line Domestic banks (both public sector and private sector banks) 40 percent of NBC 18 percent of NBC No target Export credit does not form part of priority sector 10 percent of NBC Total Priority Sector advances Total agricultural advances SSI advances Export credit l=oreign banks operating in India 32 percent of NBC No target 10 percent of NBC 12 percent of NBC with the average portfolio maturity of housing loans up to 20 lakh extended by HFCs to individual borrowers, oth erwise such loans would not be eligible for classification under priority sector. Banks have been advised to ensure the end-use of funds strictly as per the guidelines on lending to priority sector.

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