Priority sector advances: Trends, issues and strategies

Abstract

An enunciation of the need to channelise the flow of credit to certain sectors of the economy, known as the priority sectors, in the largest interest of the country, can be traced to the Reserve Bank’s credit policy for the year 1967 - 1968. The government initiated measures for social control over banks in 1967 - 1968 with a view to securing a better adaptation of the banking system to the needs of economic planning and it is playing a more active role in aiding sectors like agriculture and small scale industries (SSIs). The present study is an attempt to study the priority sector advances by the public, private and foreign bank groups. This study is based on the parameters like lending to priority sector by public, private sector and foreign bank groups, targets achieved by public, private sector and foreign bank group NPAs (Non-performing assets), while lending to priority sector. On the basis of these parameters, the study concludes that public sector banks have not achieved the target of 40% while private sector banks have achieved the overall target. No private sector bank could achieve the 10% target by lending to weaker section. On the other hand, foreign banks have achieved the small scale industries’ export credit and overall target. NPAs of public sector banks have increased because of high priority sector advances. The paper also throw light on the problems or issues which arise due to priority sector advances and also suggest some strategies to sought out these issues. All the parameters have been analyzed for the period, 2006 - 2007. Key words: Priority sector advances, targets achieved, issues, strategies.