Articles from General Knowledge Today

Current Targets in Priority Sector Lending

2011-04-23 04:04:21 GKToday

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.

Domestic banks (both public sector and private sector banks)

Total Priority Sector advances Total agricultural advances SSI advances Export credit Advances to weaker sections

40 percent of NBC 18 percent of NBC No target Export credit does not form part of priority sector 10 percent of NBC

Foreign banks operating in India 32 percent of NBC No target 10 percent of NBC 12 percent of NBC No target

Please note this important point: Net Bank Credit is the figure reported in the fortnightly return submitted to RBI by the Banks. But, the outstanding deposits under the FCNR (B) and NRNR (Non-Resident Non-Reptriable Term Deposit Account) Schemes are excluded from net bank credit for computation of priority sector lending target/ subtargets. 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 individual 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: RBI keeps issuing guidelines for the Priority sector lending. Here are a few important points: The overall target set 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 application should be disposed off as follows: Loans up to ` 25000 2 weeks Loans above ` 25000 8-9 weeks For SSI Loans up to ` 25000 2 weeks 25000 up to 5,00,000 4 weeks Above ` 5 Lakh 8-9 weeks The loans applications of the priority sector can be rejected by the branch manager provided the rejection is later verified by the Divisional Manager / regional manager However, in case of SC/ ST, a branch manager can not reject the application. In this case, only a divisional manager / regional manager can do so. Commercial banks have been advised to link the tenor of loans to Housing Finance Companies (HFCs) in line with the average portfolio maturity of housing loans up to ` 20 lakh extended by HFCs to individual borrowers, otherwise 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.