The document summarizes priority sector lending in India. It defines priority sectors as areas of the economy that are prioritized for funding by the government and central bank. Banks are directed to provide loans to these sectors at reduced interest rates to promote their development. The priority sectors include agriculture, small businesses, education and housing. The document outlines the sectors and challenges they face, as well as the role of priority sector lending in addressing issues like unemployment and poverty. It discusses targets for priority sector lending and how the Reserve Bank of India monitors compliance.

1. Presented By:-
Abhaysinh Mohite 11327
Akshay Sonone 11346
Vijay Patil 11352
Toshit Tambade 11357

2. •Priority sector-Some areas or fields in a country
depending on its economic condition or government
interest are prioritized and are called priority sectors
i.e. SMEs, agriculture. these may further be sub divided.
• Priority sector lending-Banks are directed by the central
bank of the country that loans must be given on reduced
interest rates with discounts to promote these fields. Such
lending is called priority sector lending

3.  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
 At the meeting of National Credit Council held in
JULY 1968, it was emphasized that commercial banks
should increase their involvement in the financing of
priority sector i.e. agriculture and small scale
industries. The description of priority sector was later
formalised in 1972

4.  1. Agriculture
 2. Small Scale Industries
 3. Small Road and Water Transport Operators
 4. Retail Trade
 5. Small Business
 6. Professional and Self-employed persons
 7. Education
 8. Housing Finance

6.  Agricultural sector suffers from several challenges,
namely,
 i. Fragmented and uneconomical size of landholding; 83
per cent of the landholdings are held by small & marginal
farmers and average landholding size is 0.6 ha3 per farm
household;
 ii. High wastage due to inadequate storage and supply
chain infrastructure. Estimates indicate that 7 per cent of
grain output, 10 per cent of seeds and 25 per cent to 40 per
cent of fruits and vegetables are wasted every year ;
 iii. Significant dependence on monsoon and inadequacy of
irrigation facilities;
 iv. Low level of farm mechanization;
 v. Inadequacy of extension services in agriculture

9. SMALL SCALE INDUSTRIES
 Those engaged in the manufacture, processing or preservation of goods.
 Investment in plant and machinery doesn’t exceed 1 crore
 TINY ENTERPRISES: small scale units where investment is upto Rs 25
lakh.
 SMALL SCALE SERVICE AND BUSINESS ENTERPRISES: industry
related service and business enterprises with investment upto 10 lakh in
fixed assets excluding land and building.
 Indirect finance will include credit to:
 Agencies involved in assisting the decentralized sector
 Govt. sponsored corp. providing funds to weaker sec.
 Advances to handloom cooperatives
 Credit provided by banks to KVIC

10.  Role of Micro & Small Enterprises (MSE) sector is vital
for employment generation, promoting
entrepreneurship and overall economic growth.
 Inadequate credit assistance.
 Lack of machinery and equipment
 Competition from large-scale units and imported
articles
 Absence of adequate infrastructure
 Irregular supply of raw material

12. • To get out of vicious poverty circle: 70 % of Indian
population lives below poverty line, 33% of global poor
are Indians
 buying land or equipment
 expanding a business
 improving housing
 securing a job (which often requires paying a large
bribe), etc
 to reduce unemployement

13.  Education is one of the factors which will enable us
optimize and leverage our demographic dividend
 Education is an investment that augments the stock of
human capital over a period
 Education loans extended by banks have brought higher
education within the reach of the deserving poor and
brought it to the masses
 Improved training and skilling are critical for providing
employment opportunities to the growing mass of
younger people and necessary to sustain the high growth
momentum
 The needs of education, skill and capacity building
necessitate adequate flow of credit to this sector

14. Nature Domestic banks (both Foreign banks
public and private) operating in India
Total priority sector 40%of NBC 32%of NBC
advances
Total agricultural 18%of NBC No target
advances
SSI advances No target 10%of NBC
Advances to weaker 10%of NBC No target
section
Export credit Export credit doesn’t 12%of NBC
form part of priority se

15.  RATE OF INTEREST OF LOANS UNDER
PRIORITY SECTOR?
AS per the current interest rate policy, in the case of loans upto Rs 2 lakh,
the interest rate should not exceed the prime lending rate (PLR) of the bank,
while in the case of loans above Rs 2 lakh, banks are free to determine the
interest rate.
 MONITORING OF PRIORITY SECTOR LENDING BY RESERVE
BANK
Priority sector lending by commercial banks is monitored by Reserve Bank
of India through periodical Returns received from them. Performance of
banks is also reviewed in the various fora set up under the Lead Bank
Scheme (at State, District and Block levels).

16. M V NAIR , Union Bank Chief, Head of RBI
committee
Priority sector targets for public sector and private
sector banks could be retained at the current level of
40% of the net credit to the sector.
It has recommended severe changes should be made
to exposure of foreign banks. Foreign banks’ priority
sector target should be upped from 32% to 40%.
However, this could put pressure on foreign banks to
increase their lending to priority sector categories
including agriculture and export sectors.
> Special treatment should be given to small and
marginal farmers and housing loans below Rs 2 lakhs
should be classified under priority sector

17.  RBI had been a little cautious of a bank lending to
NBFCs, but the committee has recommended
that 5% of bank's credit to NBFCs could be
classified priority sector. Lending to gold
companies will not be classified as priority
sector.
 Securitized loans could also be classified under
the priority sector. This will remove the pressure
on banks and NBFCs while lending to these
sectors. It would come as a relief for banks and
NBFCs.

18.  Increasing role of private sector
 Effective working and monitoring
 To contribute to development of economy
 To maintain healthy competition
 To achieve the target of financial inclusion

19.  In order to address to the growing need of the
economy , the private sector bank must work hand in
hand with the public sector banks as suggested by the
RBI
 Only lending will not suffice the need of the hour ,the
banks must also focus on:
1)Better application of Asset and Risk Management
2)Reducing the extent of NPAs
3)Assisting borrowers in achieving financial goals

20. 
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