Priority Sector Lending - 15 Mints Seminar Notes

Priority Sector Lending - 15 Mints Seminar Notes

 

 

                                                                                                      source: RBI

lending to those sectors of the economy and adequate credit. This role is assigned by the Reserve Bank of India to the banks for providing a specified portion of the bank lending to few specific sectors like  

• agriculture
• allied activities,
• micro
• small enterprises,
• education,
• housing for the poor, and other low-income groups and weaker sections.

Categories of priority sector

 

The broad categories of priority sector for all scheduled commercial banks are as under:

• Agriculture and Allied Activities (Direct and Indirect finance):
• 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)
• Joint Liability Groups (JLGs)

Indirect finance to agriculture shall include loans given for agriculture and allied activities as specified in Section I, appended.  

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.

 

Micro Credit :

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.

 

Education loans:

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;

 

Housing loans:

Investments by banks in securitised assets, representing loans to agriculture (direct or indirect), small scale industries (direct or indirect) and housing, shall be eligible for classification under respective categories of priority sector (direct or indirect) depending on the underlying assets, provided the securitised assets are originated by banks and financial institutions and fulfill the Reserve Bank of India guidelines on securitisation.

 

Under Weaker Sections :
Priority sector loans to the following borrowers are considered under Weaker Sections category:-
(a) Small and marginal farmers;
(b) Artisans, village and cottage industries where individual credit limits do not exceed Rs 1 Lakh ;
(c) Beneficiaries

Presented by

Kowsalya M

Banking Student

Magme School of Banking