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Priority sector lending


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Priority sector lending

  2. 2. Some areas or fields depending on its economic condition or economic importance are prioritized and are called priority sector i.e. industry, agriculture. and lending to these sectors refer to priority sector lending
  3. 7. <ul><li>AGRICULTURE( PRIMARY SECTOR) </li></ul><ul><li>Direct finance to farmers for agricultural purposes </li></ul><ul><li>Short term loan-: </li></ul><ul><li>for crop loans. </li></ul><ul><li>Advances upto 5 lakh against the pledge of agricultural produce. </li></ul><ul><li>Medium and long term loans:- </li></ul><ul><li>For the purchase of agricultural products </li></ul><ul><li>Development of irrigation potential </li></ul><ul><li>Construction of farm buildings and structures </li></ul><ul><li>Construction and running of storage facilities </li></ul><ul><li>Reclamation and land development schemes </li></ul><ul><li>Production of hybrid seeds for crops </li></ul><ul><li>Payment of irrigation charges </li></ul><ul><li>Other type of direct finance to farmers </li></ul>
  4. 8. <ul><li>Indirect finance to farmers </li></ul><ul><li>Credit for financing the distribution of fertilizers, seeds </li></ul><ul><li>Loans upto 25 lakh for activities such as cattle feed </li></ul><ul><li>Loans to electricity boards for reimbursing the exp. Already incurred by them </li></ul><ul><li>Deposits held by bank in RIDF maintained with NABARD </li></ul><ul><li>Subscription to NABARD for financing agriculture activities </li></ul><ul><li>Other type such as </li></ul><ul><li>For hire purchase </li></ul><ul><li>Loans to individuals </li></ul><ul><li>Loans to cooperative marketing societies </li></ul><ul><li>Loans for construction of storage facilities </li></ul><ul><li>Loans to NCDC for on lending to cooperative sector </li></ul><ul><li>Lending to NBFCs for on-lending to agriculture </li></ul>
  5. 9. <ul><li>SMALL SCALE INDUSTRIES( SECONDARY SECTOR) </li></ul><ul><li>Those engaged in the manufacture, processing or preservation of goods. </li></ul><ul><li>Investment in plant and machinery doesn’t exceed 1 crore </li></ul><ul><li>TINY ENTERPRISES: small scale units where investment is upto Rs 25 lakh. </li></ul><ul><li>SMALL SCALE SERVICE AND BUSINESS ENTERPRISES: industry related service and business enterprises with investment upto 10 lakh in fixed assets excluding land and building. </li></ul><ul><li>Indirect finance will include credit to: </li></ul><ul><li>Agencies involved in assisting the decentralized sector </li></ul><ul><li>Govt. sponsored corp. providing funds to weaker sec. </li></ul><ul><li>Advances to handloom cooperatives </li></ul><ul><li>Credit provided by banks to KVIC </li></ul>
  6. 10. <ul><li>loans for setting up industrial estates. </li></ul><ul><li>KVI SECTOR </li></ul><ul><li>All advances to KVI sector will be covered under priority sector advances and will be eligible for consideration under the sub target (60%) of the SSI segment. </li></ul><ul><li>eg. Bank loans to buy leaf factories manufacturing tea are to be reckoned as priority sec. lending to small scale industry. </li></ul><ul><li>OTHER ACTIVITIES/BORROWERS IN THE PRIORITY SECTOR( TERTIARY SECTOR) </li></ul><ul><li>SRWTO : Advances to SRWTO owning a fleet of vehicles not exceeding ten vehicles including the one proposed to be financed. </li></ul><ul><li>Retail trade advances granted to retail traders dealing in essential commodities and consumer cooperative stores and private retail traders with credit limit not exceeding Rs 10 lakh. </li></ul>
  7. 11. <ul><li>Small business would include individuals and firms managing a business enterprise for providing any service other than professional service whose original cost price of the equipment used for the purpose of business cost doesn’t exceed Rs 20 lakh. </li></ul><ul><li>Loan to professional and self employed persons include loan for purchasing equipment, repairing existing equipment, acquiring business premises and purchasing tools for working capital requirements. </li></ul><ul><li>Advances sanctioned to state sponsored org. for SC/ST for the purchase or supply of inputs or marketing of outputs </li></ul><ul><li>Loans granted to individuals for educational purposes </li></ul><ul><li>Loans provided by banks to self help groups </li></ul><ul><li>Assistance give to any governmental agency for the construction of houses or slum clearance. </li></ul>
  8. 12. <ul><li>Loans to software industry with credit limit of 1 crore from banks. </li></ul><ul><li>Investment in venture capital will be included in priority sec. only if they are registered with SEBI. </li></ul><ul><li>Loans for food and agro based processing centre such as: </li></ul><ul><li>Food grain milling industry </li></ul><ul><li>Dairy products </li></ul><ul><li>Fruit and vegetable processing industry </li></ul><ul><li>Technical assistance and advice to food processing industry. </li></ul>
  9. 13. Nature Domestic banks (both public and private) Foreign banks operating in India Total priority sector advances 40%of NBC 32%of NBC Total agricultural advances 18%of NBC No target SSI advances No target 10%of NBC Advances to weaker section 10%of NBC No target Export credit Export credit doesn’t form part of priority se 12%of NBC
  10. 14. <ul><li>The weaker sections under priority sector include the following: </li></ul><ul><li>Small and marginal farmers with land holding of 5 acres and less and landless laborers, tenant farmers and share croppers. </li></ul><ul><li>Artisans, village and cottage industries where individual credit limits do not exceed Rs. 50,000/- </li></ul><ul><li>Beneficiaries of Swarnjayanti Gram Swarojgar Yojana (SGSY) </li></ul><ul><li>Scheduled Castes and Scheduled Tribes </li></ul>
  11. 15. <ul><li>Beneficiaries of Differential Rate of Interest (DRI) scheme </li></ul><ul><li>Beneficiaries under Swarna Jayanti Shahari Rojgar Yojana (SJSRY) </li></ul><ul><li>Beneficiaries under the Scheme for Liberation and Rehabilitation of Scavangers (SLRS). </li></ul><ul><li>Self Help Groups (SHGs) </li></ul>
  12. 16. <ul><li>State Financial Corporations (SFCs)/State Industrial Development Corporations (SIDCs ) </li></ul><ul><li>Rural Electrification Corporation (REC ) </li></ul><ul><li>National bank for agriculture and rural development(NABARD) </li></ul><ul><li>SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA(SIDBI) </li></ul><ul><li>THE NATIONAL SMALL INDUSTRIES CORPORATION LTD (NSIC) </li></ul><ul><li>NATIONAL HOUSING BANK (NHB) </li></ul><ul><li>HOUSING AND URBAN DEVELOPMENT CORPORATION (HUDCO) </li></ul>
  13. 17. <ul><li>RATE OF INTEREST OF LOANS UNDER PRIORITY SECTOR? </li></ul><ul><li>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. </li></ul><ul><li>MONITORING OF PRIORITY SECTOR LENDING BY RESERVE BANK </li></ul><ul><li>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). </li></ul>
  14. 19. <ul><li>Proposed scheme of tradable Priority Sector Lending Certificates (PSLCs) for MFI. </li></ul><ul><li>Rbi formed new committee headed by union bank of india cmd mv nair for re-examine the existing classification under priority sector </li></ul><ul><li>More participation by private sector for fulfilling requirement </li></ul><ul><li>Increase in NPA ‘s from priority sector lending </li></ul>
  15. 20. As on march (fig in cr) Public sector bank Private sector bank Foreign bank 2001-02 127807 (43.6) 10819 (38.7) 23843 (35.3) 2005-06 409748 (40.0) 106586 (44.8) 30439 (34.4) 2009-10 71240 (39.6) 167768(45.7) 49835 (33.4)
  16. 21. Year ended march(fig in cr) Priority sector Non priority sector Public sector 2006-07 21926 (48.1) 23249(51) 444(1.0) 2007-08 22374(54,1) 18664 (45.1) 341(0.8) 2008-09 22954 (59.2) 15158(39.3) 490(1.3)
  17. 22. <ul><li>THANK YOU </li></ul>