LENDING TO PRIORITY SECTOR
The main features of guidelines issued
by Reserve Bank of India to banks on
lending to Priority Sector are as follows:
The priority sector broadly comprises the
following:
- Agriculture
- Small Scale Industries
- Other activities / borrowers (such as small business, retail trade, small transport operators, professional and self employed persons, housing, education loans, micro credit, etc.)
Targets for Priority Sector Lending
Scheduled Commercial Banks
excluding Foreign Banks
- Total priority sector advances to constitute 40 per cent of net bank credit and that a substantial portion to be directed to the weaker sections.
- Sub targets within the overall main lending target of 40 per cent of net bank credit:
- 18 per cent of net bank credit to agricultural sector,
- 10 per cent of net bank credit to the ‘weaker sections’ and
- 1 per cent of previous year’s total advances to be given under the Differential Rate of Interest (DRI) scheme.
- Shortfall in Lending to Priority Sector to be contributed to the Rural Infrastructure Development Fund (RIDF) established with NABARD as per details decided every year in the Union Budget.
Foreign Banks
- Minimum lending to priority sector shall be 32 percent of their net credit.
- Since the foreign banks have no rural branch network, the composition of priority sector advances in their case will include export credit provided by them.
- Sub targets within the overall main lending target of 32 per cent of net bank credit:
- Not less than 10 per cent of the net bank credit to small scale industries sector
- Not less than 12 per cent of the net bank credit to constitute export credit
Any shortfall in target/sub target to be
made good by depositing for a period
of three years, an amount equivalent to
the shortfall with the Small Industries
Development Bank of India (SIDBI) at
rates of interest ranging from Bank Rate
to Bank Rate minus 3 percentage points.
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