Priority Sector Lending
Priority Sectors are those sectors in the economy which may not get timely and adequate credit in the absence of this special dispensation. One of the reasons of this is that many people in weaker sections wanting of loans do not have assets to keep as security against credits. But each person has the right to get all the benefits in the economy.
Our government and Central Bank Reserve Bank of India (RBI) also keep an effort to help the weaker sections. Several priority sectors are recognized by RBI, and certain targets are given to banks according to which banks must provide loans in priority to these sectors.
As notified by RBI, categories under priority sector are
- Micro and Small Enterprises
- Export Credit
Although initially there was no specific target fixed in respect of priority sector lending, in November 1974 the banks were advised to raise the share of these sectors. After this, it was agreed that banks should aim at raising the proportion of their advances to priority sector to 40 percent.
The targets and sub-targets under priority sector lending are linked to Adjusted Net Bank Credit (ANBC).
The targets and sub-targets set under priority sector lending for domestic and foreign banks operating in India are furnished below:
|Categories||Domestic commercial banks / Foreign banks with 20 and above branches (As percent of ANBC or Credit Equivalent of Off-Balance Sheet Exposure, whichever is higher)||Foreign banks with less than 20 branches (As percent of ANBC or Credit Equivalent of Off-Balance Sheet Exposure, whichever is higher)|
|Total Priority Sector||40||32|
|Total agriculture||18||No specific target.|
|Advances to Weaker Sections||10||No specific target.|
Description of the Categories under priority sector:
- Loans to individual farmers [including Self Help Groups (SHGs) or Joint Liability Groups (JLGs), i.e. groups of individual farmers, provided banks maintain disaggregated data on such loans] engaged in Agriculture and Allied Activities, viz., dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture.
- Loans to corporates, partnership firms and institutions engaged in Agriculture and Allied Activities (dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture).
Micro and small enterprises
The limits for investments as notified by Ministry of Micro Small and Medium Enterprise are:
|Enterprises||Investment in plant and machinery|
|Micro Enterprises||Do not exceed twenty five lakh rupees|
|Small Enterprises||More than twenty five lakh rupees but does not exceed five crore rupees|
|Enterprises||Investment in equipment|
|Micro Enterprises||Does not exceed ten lakh rupees|
|Small Enterprises||More than ten lakh rupees but does not exceed two crore rupees|
Loans to individuals for educational purposes including vocational courses upto Rs 10 lakh for studies in India and Rs 20 lakh for studies abroad.
- Loans to individuals up to Rs 25 lakh in metropolitan centres with population above ten lakh and Rs 15 lakh in other centres for purchase/construction of a dwelling unit per family excluding loans sanctioned to bank’s own employees.
- Loans for repairs to the damaged dwelling units of families up to Rs 2 lakh in rural and semi- urban areas and up to Rs 5 lakh in urban and metropolitan areas.
Export Credit extended by foreign banks with less than 20 branches will be reckoned for priority sector target achievement.
- Loans, not exceeding Rs 50,000 per borrower provided directly by banks to individuals, provided the borrower’s household annual income in rural areas does not exceed Rs 60,000 and for non-rural areas it should not exceed Rs 1,20,000.
- Loans to distressed persons.
- Overdrafts, up to Rs 50,000 (per account), granted against ‘no-frills’ / basic banking / savings accounts provided the borrowers household annual income in rural areas does not exceed `Rs 60,000 and for non-rural areas it should not exceed Rs 1,20,000.
Under Weaker Sections under priority sector:
- Small and marginal farmers.
- Loans to distressed persons other than farmers and to individual beneficiaries not exceeding Rs 50,000 per borrower.
- Loans to Self Help Groups.
- Beneficiaries of Swarnjayanti Gram Swarozgar Yojana (SGSY), now National Rural Livelihood Mission (NRLM).
- Scheduled Castes and Scheduled Tribes.
- Beneficiaries of Differential Rate of Interest (DRI) scheme.
- Beneficiaries under Swarna Jayanti Shahari Rozgar Yojana (SJSRY).