Priority Sector Lending by Public and Private Sector Banks in India

Dr D Veena*, ,Prof G V Bhavani Prasad

doi:10.35940/ijmh.j0992.0641020

Abstract

Priority Lending is critical to the inclusive growth in India. The credit distribution to the priority sectors is vital in ensuring that the economic growth is even and percolates down to all levels in the economy. RBI made it mandatory to the Scheduled Commercial Banks (SCB) in India for providing credit delivery to critical sectors identified as part of priority sector. RBI mandated all the banks should achieve the targets and sub targets of priority sector lending as minimum percent of Adjusted Net Bank Credit (ANBC) or Off - Balance sheet Exposure (OBE) whichever is higher. This paper aims at understanding the credit delivery to Priority Sector by Public Sector Banks (PSBs), Private Sector Banks (PrSBs), analyze the ability of the banks to meet the targets and sub targets as Agriculture Advances, Micro, Small and Medium Enterprises Advances and Weaker Sections Advances and whether these banks are meeting the recommendations of the RBI in providing credit to different sub segments of priority sector especially, Agriculture, MSMEs and Weaker sections. Ratios were calculated to check the proportion of these priority advances in the total advances, the percentage of priority in the ANBC. The statistical tools are used to check the significant variation of priority lending by these banks. Public Sector banks are proved that they are dominant partners in this strategy for sustainability of financial inclusion through lending to all the target and sub targets as per the RBI norms. Major portion of PrSBs lending is towards MSMEs while PSB were targeting more on agriculture and weaker sections.

Highlights

Priority Sector Lending’ came through the idea of ‘DirectLending’ by the banks to few needy and in adequately serviced sectors
Research Methodology: This paper studies the Priority Sector Lending by Public Sector Banks, Private Sector Banks and targets and sub targets like Agriculture Advances, Micro, Small and Medium Enterprises Advances and Weaker Sections Advances
The statistical test proved that there is no significant difference in the Ratio of Priority sector lending to Adjusted Net Bank Credit (ANBC) between Public Sector Banks (PSBs), Private Sector Banks (PrSBs)

Summary

Introduction

Priority Sector Lending’ came through the idea of ‘Direct. Lending’ by the banks to few needy and in adequately serviced sectors. RBI the central bank of India and the Indian banks believed lending to the specific sectors and regulating the core sectors can bring about balanced growth, stability in the economy. Priority Sector includes the sectors of national importance, once they were not considered or neglected by the banks for the purpose of accessibility of credit are considered to be as priority to provide credit as they are the corner stones for the country’s true development.

Objectives

Results

Conclusion