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Priority sector lending

Priority sector refers to those sectors of the economy which, though viable and creditworthy, may not get timely and adequate credit in the absence of this special dispensation.Typically, these are small value loans to farmers for agriculture and allied activities, micro and small enterprises, poor people for housing, students for education and other low income groups and weaker sections.

  • Those sectors which are able to get timely and adequate credit would not qualify for priority sector status.
  • Priority sector activities have to be carried out by banks as a part of their normal business operations. It should not be viewed as Corporate Social Responsibility.
  • https://www.rbi.org.in/scripts/bs_speechesView.aspx?id=727
  • The objective of these guidelines is not to facilitate banks to achieve the priority sector targets but to ensure easier access to credit to those deserving beneficiaries who are otherwise not getting it, or finding it difficult.

Priority Sector Lending

What are the different categories under priority sector?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
  • PSL status is also being given to start-ups; and the limits for renewable energy, including solar power and compressed bio-gas plants, are being increased. Aug 7, 2020

What is included under Weaker Sections under priority sector?

Priority sector loans to the following borrowers are eligible to be considered under Weaker Sections category:-

  • Priority sector loans to the following borrowers will be considered under Weaker Sections category:-
    No. Category
    (i) Small and Marginal Farmers
    (ii) Artisans, village and cottage industries where individual credit limits do not exceed ₹1 lakh
    (iii) Beneficiaries under Government Sponsored Schemes such as National Rural Livelihood Mission (NRLM), National Urban Livelihood Mission (NULM) and Self Employment Scheme for Rehabilitation of Manual Scavengers (SRMS)
    (iv) Scheduled Castes and Scheduled Tribes
    (v) Beneficiaries of Differential Rate of Interest (DRI) scheme
    (vi) Self Help Groups
    (vii) Distressed farmers indebted to non-institutional lenders
    (viii) Distressed persons other than farmers, with loan amount not exceeding ₹1 lakh per borrower to prepay their debt to non-institutional lenders
    (ix) Individual women beneficiaries up to ₹1 lakh per borrower
    (x) Persons with disabilities
    (xi) Overdraft limit to PMJDY account holder upto ₹ 10,000/- with age limit of 18-65 years.
    (xii) Minority communities as may be notified by Government of India from time to time.

The targets and sub-targets for banks under priority sector are as follows:

    • Total Priority Sector : 40 per cent of Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher
    • Agriculture # 18 per cent
    • Micro Enterprises 7.5 percent
    • Advances to Weaker Sections 10 percent

 Targets /Sub-targets for Priority sector

(i) The targets and sub-targets set under priority sector lending for all scheduled commercial banks operating in India are furnished below:

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