Case Study 1

Read the following case carefully and answer the questions given at the end.
Suppose that you have been appointed as Financial Advisor in a Bank. Your task is to manage the priority
sector lending of the Bank (Case
Case I: Scheduled Commercial Bank and Case II: Foreign Bank).
 Scheduled Commercial Bank wants to invest in Agricultural Advances, Advances to weaker
section and Differential Rate of Interest Scheme as minimum as possible. The deficit of target of
Priority Sector Lending will be met out by SSI Advances.
 In case of Foreign Bank, it is not willing to provide advances to weaker section and it also desires
to invest in Export Credit as minimum as possible.
 Adjusted Net Bank Credit is Rs. 3000 Crore, while Credit Equivalent amount of Off-Balance
Sheet Exposure is Rs. 2800 Crore.
 The outstanding loan at the year end is equal to Rs. 9000 Crore.
The following table is related to Priority Sector Lending for a Scheduled Commercial Bank and Foreign
Bank for the financial year 2009 – 10.

Priority Sector Lending (Rs. Crore)

S.
Priority Sectors Scheduled
No. Foreign Bank
Commercial Bank

1 Agricultural Advances
(a) Direct Finance ? 210
(b) Indirect Finance 205 50
2 SSI Advances
inInvestment

(a) Less than 5 L ? ?

(b) 5 L - 25 L ? ?
Machinery
Plant &

(c) 25 L and above ? ?

3 Export Credit 145 ?

4 Advances to Weaker Section ? ?
5 Differential Rate of Interest Scheme ? 0
 Total (1+2+3+4+5) ? ?
You are required to:
(a) Find the missing figures keeping into consideration of the given information and figures.
(b) Also comment on the required disbursement scheme of Advances under Differential Rate of
Interest Scheme (DRIS) for scheduled commercial bank.
(c) Find the missing figures keeping into consideration of the given information and figures.

Priority Sector Lending (Rs. Crore)

S.
Priority Sectors Scheduled
No. Foreign Bank
Commercial Bank
1 Agricultural Advances
(a) Direct Finance 405 210
(b) Indirect Finance 205 50
2 SSI Advances
inInvestment

(a) Less than 5 L 80 136

(b) 5 L - 25 L 40 68
Machinery
Plant &

(c) 25 L and above 80 136

3 Export Credit 145 360

4 Advances to Weaker Section 300 0
5 Differential Rate of Interest Scheme 90 0
Total (1+2+3+4+5) 1200 960

(b) Also comment on the required disbursement scheme of Advances under Differential Rate of
Interest Scheme (DRIS) for scheduled commercial bank.
 It should be ensured that not less than 40% of the advances granted under DRI Scheme
go to the Scheduled Caste / Scheduled Tribes.
 Hence, at least 36 Crore [90 x 40%] Advances should be granted to Scheduled
Caste / Scheduled Tribes.
 At least two-third of DRI Advances should be granted through rural and semi urban
branches.
 Hence, Advances of 60 Crore (at least) has to be granted through rural and semi
urban branches.
 Case Study 2

 Outstanding Loan at the end of the year = Rs. 25,000 Crore

Scheduled
Particulars Commercial Bank*
(In Crore)
Total Priority Sector Lending (TARGET) 4,000
Agriculture (Direct and Indirect Finance) 1,600
(a) Direct Finance 1,100
(b) Indirect Finance 500
SSI Advances 200
Advances to Weaker Sections 200
Differential Rate of Interest Scheme 300
Contribution to Scheduled Castes / Tribes 110
Contribution from Urban Branches 120

Export Credit 300

Educational Loans 400
Housing Loans 600
Micro Credit 150
 Loans upto Rs. 50,000 per Client 100

Small Business / Service Enterprises 250

 Loans to Firm where investment in Plant & Machinery exceeds 2 Crore 50

 Out of educational loans, 20 loans (Rs. 25 Lakh each) were sanctioned to students for
abroad study.
 Deficit (if any) shall be meet out in ratio of 3:2:1 through Housing Loans, Education Loans,
and SSI Advances