priority sector lending in india

2. • Priority Sector refers to those sectors of the economy which may not get
timely and adequate credit in the absence of this special dispensation
• Priority Sector Lending is an important role given by the Reserve Bank of
India (RBI) to the banks for providing a specified portion of the bank
lending to few specific sectors
• This is essentially meant for an all round development of the economy as
opposed to focusing only on the financial sector

3. Priority Sector includes the following
categories:
(i) Agriculture
(ii) Micro, Small and Medium Enterprises
(iii) Export Credit
(iv) Education
(v) Housing
(vi) Social Infrastructure
(vii) Renewable Energy
(viii) Others

4. The targets and sub-targets for banks under
priority sector are as follows:
Categories Domestic scheduled commercial banks
and Foreign banks with 20 branches
and above
Foreign banks with less
than 20 branches
Total Priority Sector 40 percent of Adjusted Net Bank
Credit or Credit Equivalent Amount of
Off-Balance Sheet Exposure, whichever
is higher.
Foreign banks with 20 branches and
above have to achieve the Total Priority
Sector Target within a maximum period
of five years.
40 percent of Adjusted
Net Bank Credit or
Credit Equivalent
Amount of Off-Balance
Sheet Exposure,
whichever is higher; to
be achieved in a phased
manner by 2020.

5. Categories Domestic scheduled commercial banks and
Foreign banks with 20 branches and above
Foreign banks
with less than 20
branches
Agriculture 18 percent of ANBC or Credit Equivalent
Amount of Off-Balance Sheet Exposure,
whichever is higher.
Within the 18 percent target for agriculture, a
target of 8 percent of ANBC or Credit Equivalent
Amount of Off-Balance Sheet Exposure,
whichever is higher is prescribed for Small and
Marginal Farmers, to be achieved in a phased
manner i.e., 7 per cent by March 2016 and 8 per
cent by March 2017.
Foreign banks with 20 branches and above
have to achieve the Agriculture Target within a
maximum period of five years starting from April
1, 2013 and ending on March 31, 2018
Not applicable

6. Categories Domestic scheduled commercial
banks and Foreign banks with 20
branches and above
Foreign banks with
less than 20 branches
Micro Enterprises 7.5 percent of ANBC or Credit
Equivalent Amount of Off-Balance
Sheet Exposure, whichever is higher
to be achieved in a phased manner
i.e. 7 per cent by March 2016 and 7.5
per cent by March 2017.
The sub-target for Micro
Enterprises for foreign banks with 20
branches and above would be made
applicable post 2018 after a review
in 2017.
Not Applicable

7. Categories Domestic scheduled
commercial banks and
Foreign banks with 20
branches and above
Foreign banks with less
than 20 branches
Advances to Weaker
Sections
10 percent of ANBC or
Credit Equivalent Amount
of Off-Balance Sheet
Exposure, whichever is
higher.
Foreign banks with 20
branches and above have
to achieve the Weaker
Sections Target within a
maximum period of five
years
Not Applicable

9. The lending to agriculture sector has
been defined to include :
• Farm credit
 Loans to individual farmers directly engaged in Agriculture and
Allied Activities, viz, dairy, fishery, animal husbandry, poultry, bee-
keeping and sericulture
 Crop loans to farmers, which will include traditional/non-traditional
plantations and horticulture
 Loans to farmers for pre and post-harvest activities
 Loans to farmers up to 50 lakh against pledge/hypothecation of
agricultural produce
 Loans to distressed farmers indebted to non-institutional lenders
 Loans to farmers under the Kisan Credit Card Scheme

10. • Agriculture Infrastructure
 Loans for construction of storage facilities
 Soil conservation and watershed development
 Plant tissue culture and agri-biotechnology, seed production,
production of bio-pesticides, bio-fertilizer, and vermi
composting.

11. • Ancillary Activities
 Loans up to 5 crore to co-operative societies of farmers for
disposing of the produce of members.
 Loans for setting up of Agriclinics and Agribusiness Centres
 Loans for Food and Agro-processing up to an aggregate
sanctioned limit of 100 crore per borrower from the banking
system

13. Micro, Small and Medium Enterprises (MSMEs)
• The limits for investment in plant and machinery/equipment for manufacturing /
service enterprise, as notified by Ministry of Micro, Small and Medium Enterprises
are as under :

16. • This includes Education 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;

17. • For housing loans to individuals, limit to be counted as priority sector loans
is Rs. 28 Lakh in Metros and Rs. 20 Lakh in other cities, towns and
villages.
• For repairing of house, limit is Rs. 5 Lakh in metros and Rs. 2 lakh in
others.
• Loans to any government agency for construction of houses subject to
ceiling of Rs. 10 Lakh per house / dwelling unit for weaker sections or
slum clearing.
• Outstanding deposits with NHB on account of priority sector shortfall.

18. • This includes loan up to Rs. 15 crore to borrowers for purposes
like solar based power generators, biomass based power
generators, wind mills, micro-hydel plants and for non-
conventional energy based public utilities Viz. Street lighting
systems, and remote village electrification.
• For individual households, the loan limit will be 10 lakh per
borrower.

19. • This includes loans up to 5 crore per borrower for building
social infrastructure for activities viz. schools, health care
facilities, drinking water facilities and sanitation facilities
including construction/ refurbishment of household toilets and
household level water improvements in Tier II to Tier VI
centres.
• It also includes loan to Micro-finance Institutions (MFIs) for
on-lending to SHGs and JLGs for water and sanitation
facilities.

20. • Personal loans to weaker sections up to Rs. 50,000 per
borrower.
• Loans to distressed persons with a limit to Rs. 1,00,000/- per
borrower to prepay their debt to non-institutional lenders
• Loans to State Sponsored Organizations for Scheduled Castes/
Scheduled Tribes for the specific purpose of purchase and
supply of inputs and/or the marketing of the outputs of the
beneficiaries of these organizations.

21. • Eradication of poverty is achieved through the
implementation of PSL programme.
• Through the concept of PSL, upliftment of weaker sections is
made Possible.
• Providing new opportunities for productive and gainful self-
employment to the educated unemployed youth is one of the
major aims of PSL programme.
• Reduction of unemployment is one of the major goals
achieved through PSL,.
• Due to agriculture financing the goal of self-sufficiency in
food is achieved

22. • Increasing N.P.A.
• Political issues
• High over dues