c.paramasivan Bank finance to priority sectors in tirunelveli district,


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c.paramasivan Bank finance to priority sectors in tirunelveli district,

  1. 1. BANK FINANCE TO PRIORITY SECTORS IN TIRUNELVELI DISTRICT, TAMIL NADU Dr.C. PARAMASIVAN 1 & P. MARI SELVAM 2 ABSTRACT The concept of Priority Sector Lending is mainly intended to ensure that assistance from banking system should flows in an increasing manner to those sectors of the economy which though accounting for a significant proportion of the national product have not received adequate support of institutional finance in the past. Priority sectors particularly agricultural sector till facing the problems of timely finance to extent their activities. In this regards, how the commercial banks provides financial assistance to priority sectors over a periods, recovery performance under priority sector lending, problems of the bankers in the priority sector lending are the major problems to be analyzed in a timely manner. Hence this study focused on the commercial banks and its financial performance relating to priority sector during a particular study period. -----------------------------------------------------------------------------------------------------------Key words: Priority Sector Lending, institutional finance, Economic development Introduction The Economic development of any country depends upon the existence of a well organized financial system. It is financial system which supplies the necessary financial inputs for the production of goods and services which in turn promote the well being and standard of living of the people of a country. Thus the “financial system” is a broader term which brings under its fold the financial markets and the financial institutions which support the system. An efficient functioning of the financial system facilities the free flow of funds to more productive activities and thus promotes investments. Thus, the financial system provides the intermediation between savers and investors and promotes faster economic development. In this regards, this paper is an attempt to discuss the role of banking finance to priority sector in Tirunelveli District of Tamilnadu during the year 2010-11. Profile of Tirunelveli District The Tirunelveli District was formed in 1790 by the East India Company, later came under the direct control of the British Crown Queen Victoria. The
  2. 2. name Tirunelveli has been composed from the three Tamil words i.e. “ThiruNel-Veli” meaning “Sacred Paddy Hedge”. This District is located in the southern part of Tamilnadu and surrounded by Virudhunagar District on the North, Tutticorin District on the East, kanyakumari District on the South and Western Ghats on the West Tirunelveli has its own individuality from rice to culture. Agriculture plays a vital role in the District’s economy. The total cropped area was 193905 hectares, which worked out 28.91% of the total Geographical area. Tirunelveli District is industrially backward. There are 25 medium and major industries such as Cement, Cotton yarn, Calcium Carbide, Sugar, Cotton seed oil, Printing papers and flour mills etc., In addition to this there are about 14389 Small scale industries registered in this district. Priority sector Lending The concept of priority sector was evolved in the late sixties in order to focus attention on the need to ensure adequate credit facilities to certain neglected sectors of the economy particularly in the rural areas. The involvement of banks in priority sector lending has grown considerably with special emphasis on opening branches in un-banked areas. The broad categories of priority sector for all scheduled commercial banks are as under: (i) Agriculture (Direct and Indirect finance): (ii) Small Scale Industries (Direct and Indirect Finance): (iii) Small Business / Service Enterprises (iv) Micro Credit : (v) Education loans: (vi) Housing loans: Table No.1 Bank Finance to Overall Priority sector Lending S.No Priority Sector Amount % to total 1 Agriculture sector 18798780 52.43 2 Micro and Small Enterprises sector 6846837 19.05 3 Retail trade sector 1730854 4.83 4 Micro finance to SHC/JLG/NB 2147555.99 5.99 5 Education sector 2206955 6.17
  3. 3. 6 Housing sector Total 4129414 11.53 35860395.99 100 Source: Lead Bank Annual Report 2010-11 Banks are responsible to grant financial assistance to socio economic activities which needs to accomplish the sustainable development of the country. Priority sector lending is one of the emerging concepts which help to convene the financial needs of the sectors. In this regards, agricultural sectors amounted to Rs. 18798780 (52.43%) financial assistance from the banking institutions in the year 2010 in Tirunelveli district followed by Micro and Small Enterprises sector (19.05 %), Housing sector (11.53%), Education sector (6.17%), Micro finance to SHC/JLG/NB(5.99 %) and Retail trade sector(4.83%). it is observed that ,banks were provided satisfactory amount to priority sectors in the year 2010 in Tirunelveli district Bank Finance to Agriculture Sector Direct finance to agriculture shall include short, medium and long term loans given for agriculture and allied activities directly to individual farmers, Self-Help Groups (SHGs) or Joint Liability Groups (JLGs) of individual farmers without limit and to others (such as corporate, partnership firms and institutions) up to Rs. 20 lakh, for taking up agriculture/allied activities. Table No. 2 Bank Finance to Agriculture Sector in Tirunelveli District Sl.No. Bank Group Agriculture sector % to Total P.S.A 1 State Bank of India 2426574 29.50 2 Nationalized Bank 9015593 58.91 3 Private Sector Banks 3794123 54.56 4 Regional Rural Bank 2733888 63.22 5 Co-operative Bank 828602 78.55 Source: Lead Bank Annual Report 2010-11 Agricultural sectors is the major part of priority sector, which constitute more than 60 per cent of the total advances to P.S.L. by the commercial banks, providing advances to Agricultural sectors, Co-operative banks play a key role which contribute 78.55 per cent of its total P.S.A to Agricultural sector, followed by Regional Rural Bank 63.22 per cent. Both Co-operative Bank and Regional Rural Bank were established mainly for the purpose of promoting Agricultural
  4. 4. sector in the country. Hence they are were provided more loans to Agricultural sector. Agricultural sector lending by nationalised banks are also are of the remarkable achievement in the district which provided 58.91 per cent of its P.S.A to Agricultural sector followed by private sector banks 54.56 per cent. State Bank of India has given only very limited finance 29.50 per cent to Agricultural sector during the study period. Bank Finance to Micro and Small Enterprises sector Direct finance to small scale industries (SSI) shall include all loans given to SSI units which are engaged in manufacture, processing or preservation of goods and whose investment in plant and machinery (original cost) excluding land and building does not exceed the amounts specified in Section I, appended. Indirect finance to SSI shall include finance to any person providing inputs to or marketing the output of artisans, village and cottage industries, handlooms and to cooperatives of producers in this sector. Table No. 3 Bank Finance to Micro and Small Enterprises sector Sl.No. Bank Group MSE % to Total P.S.A 1 State Bank of India 1155150 14.043 2 Nationalized Bank 3037579 19.848 3 Private Sector Banks 1484821 21.35 4 Regional Rural Bank 1090838 25.22 5 Co-operative Bank 78449 7.43 Source: Lead Bank Annual Report 2010-11 Micro & Small Enterpriser sectors is also are of the major players in our economy. Which helps to provides more employment opportunities particularly in rural areas. There sectors also needs liberal financial assistance from banks &financial institutions in the year 2010. Nationalised banks finance to SME sector amounted to Rs.30,37,579 which constitute 19.85 per cent followed by private banks (Rs.14,84,821), State Bank of India (Rs.11,55,150), Regional Rural Bank (Rs.10,90,838) and Co-operative Banks (Rs.78,449). But as regards, percentage to total P.S.A., Regional Rural bank provided 25.22 per cent of its finance to MSME followed by private sector banks 21.35 per cent , Nationalised Bank 19.85 per cent, State bank of India 14.04 per cent and Co-operative bank
  5. 5. 7.43 per cent. Hence, it is clear that, the co-operative banks, not much interested to provide finance to MSME in Tirunelveli District. Bank Finance to Retail Trade Sector Small Business / Service Enterprises shall include small business, retail trade, professional & self employed persons, small road & water transport operators and other service enterprises as per the definition given in Section I and other enterprises that are engaged in providing or rendering of services, and whose investment in equipment does not exceed the amount specified in Section I, appended. Table No. 4 Bank Finance to Retail Trade Sector SL.No. Bank Group Retail Trade Sector % to Total P.S.A 1 State Bank of India 286786 3.48 2 Nationalized Bank 447960 2.92 3 Private Sector Banks 888899 12.78 4 Regional Rural Bank 80424 1.86 5 Co-operative Bank 26785 2.53 Source: Lead Bank Annual Report 2010-11 Retail trade sector is a magical segment of the priority sector which are mostly rural based and unorganized in nature. Private sector banks are encouraging there segments which consists of high liquidity and reliable repayable system Rs.8,88,899 were sanctioned to RTS by private sector banks which constitutes 12.78 per cent of its total private sector advances. Other Banking institutions such as State Bank of India, Nationalised bank, Regional Rural Bank, & Co-operative Bank were provided financial assistance to RTS amounted to in between 1-3 per cent of their total P.S.A Bank Finance to Micro Finance to SHC/JLG/NB Provision of credit and other financial services and products of very small amounts not exceeding Rs. 50,000 per borrower to the poor in rural, semi-urban and urban areas, either directly or through a group mechanism, for enabling them to improve their living standards, will constitute micro credit. Table No. 5. Bank Finance to Micro Finance to SHC/JLG/NB SL.No. Bank Group M.R to SHC/JLG/NB % to Total P.S.A 1 State Bank of India 1368303 16.63 2 Nationalized Bank 394369 2.57
  6. 6. 3 Private Sector Banks 1333.99 0.019 4 Regional Rural Bank 368800 8.52 5 Co-operative Bank 14750 1.39 Source: Lead Bank Annual Report 2010-11 Micro finance provided to the rural poor particularly to women to empower them in aspects. In this regards, banks are advice to provide Microfinance to needed people in a satisfactory level. State Bank of India has sanctioned Rs.13,68,303 as Micro finance in the year 2010. Which constitutes 16.63 per cent of its total P.S.A, followed by Regional Rural Bank (Rs.3, 68,800)? Nationalised Bank (Rs.3,94,369), Cooperative Bank (Rs.14,750) and Private sector banks (Rs.1,333.99). This table reveals that, State bank of India is the major Micro Finance provides in Tirunelveli district during the study period 2010. Bank Finance to Education Sector Education loans include loans and advances granted to only individuals for educational purposes up to Rs. 10 lakh for studies in India and Rs. 20 lakh for studies abroad, and do not include those granted to institutions; Table No. 5 Bank Finance to Education Sector SL.No. Bank Group Education Sector % to Total P.S.A 1 State Bank of India 828236 10.06 2 Nationalized Bank 1271542 8.30 3 Private Sector Banks 56506 0.81 4 Regional Rural Bank 36517 0.84 5 Co-operative Bank 14154 1.34 Source: Lead Bank Annual Report 2010-11 As per the Government of India direct in all the banks should provides Education loans to needed students with out any securities. As per the report of annual credit plan of Tirunelveli district, Nationalised Banks sanctioned Educational loan amounted to (Rs.12,71,542) which is the 8.30 per cent of its total P.S.A, State Bank of India sanctioned education loan amounted (Rs.8,28,236) , Private Sector bank (Rs.56,506), Regional Rural Bank (Rs.36,517) and Cooperative Bank(Rs.14,154). It is observed that Nationalised bank & State bank of India sanctioned more Educational loans their other banks in this district. Bank Finance to Housing Sector
  7. 7. Loans up to Rs. 15 lakh for construction of houses by individuals, (excluding loans granted by banks to their own employees) and loans given for repairs to the damaged houses of individuals up to Rs.1 lakh in rural and semiurban areas and up to Rs.2 lakh in urban areas. Table No. 7 Bank Finance to Housing Sector Sl.No. Bank Group Housing Sector % to Total P.S.A 1 State Bank of India 2160310 26.26 2 Nationalized Bank 1136454 7.42 3 Private Sector Banks 727315 10.46 4 Regional Rural Bank 13333 0.30 5 Co-operative Bank 92002 8.72 Source: Lead Bank Annual Report 2010-11 Housing finance in a emerging segment of loan which consists of one of the revenue generation loan to the sanctioned banks. Sate bank of India sanctioned more housing finance which amounted to Rs.21,60,310 (26.26 per cent of bank(Rs.11,36,454), Private sector P.S.A) , followed by Nationalised bank (Rs.7,27,315), Co-operative bank (Rs.92,002) and Regional Rural bank (Rs.13,333). Sate bank of Indi and private sector banks are provides liberalized finance to housing sectors which constituted to 26.26 per cent and 10.46 per cent of total P.S.A respectively. Suggestions This study reveals the following the important suggestions which will be helpful to improve the performance of banking sectors with reference to priority sector lending in the study area. Priority sector is one of the emerging segments of the Indian economy which contributes more employment opportunities, poverty alleviation, promote rural earning capacity and remove regional imbalances. Hence there is a need to flow of proper and sufficient credit should be confirmed by the concerned authorities. Banks are responsible to simplify their credit terms to Priority sector which are mostly engaged by rural and uneducated people, and not to produce any collateral security against loan.
  8. 8. Agriculture sectors loan amounted to more than 50 per cent by banks in Tirunelveli district. But these amounts have been sanctioned to the real beneficiaries for agriculture purpose may not be guaranteed by the bankers. Attitude of bank officials should be improved while sanction loans to these sectors. Opening of savings account in the nationalised banks is not encouraged or interested by the bank employees in most of the cases. The success or failure of the banks are fully depends on the employees of the banks. Hence bank employees must responsible for the deposits and lending of loans in each and every banks. Conclusion The priority sector lending is mainly intended to ensure that the assistance from the banking system to those sectors of the economy which has not received adequate support of institutional finance. The attainment of the socio economic priorities of the government like growth of agriculture, promotion of small entrepreneurs and development of backward area etc is the major responsibility of commercial banks. Since seventies, Reserve Bank of India and government of India have stipulated guidelines for priority sector lending by banks. It concludes that the bank finance to priority sector lending is inevitable part of our banking system as well as our economic development. Reference books Ahmed, Khan Masood, (1992): Banking in India, Anmol publications, New Delhi. Bilgrami.S.A.R (1982): Growth of Public Sector Banks – A Regional Growth Analysis, Deep and Deep publication, New Delhi. Chakrabarthy.K.C (1990): Banking in 1990, Himalaya Publishing House, Bombay. Dep, Kalpada (1998): “Indian Banking since Independence”. Ashish Publishing House, New Delhi. Gupta.S.P (2000): Statistical Methods, Sultan Chand & Sons, New Delhi. Kothari.C.R (1991): “Investment Banking and Customer Service”, Vol. II, Arihant publishers, Jaipur. Sundram K.P.M. Rudder Dutt Indian economy Sultan Chand Publications New Delhi, 2007. Parameshwaran, Indian Banking Sultan Chand Publications New Delhi, 2005. Trend and Progress of Banking in India – 2009-2010 – RBI Report.