Priority Sector Lending in India: A Non Parametric Analysis

Abstract

Priority sectors form the foundation and base structure of an economy. Providing adequate financial aid to these important sectors can lead to the development of an economy in real terms. These sectors include Agriculture, Micro Small and Medium Enterprises, Housing, Education and other weaker sections of an economy. Reserve Bank of India, since 1968 have specified separate targets and sub-targets for priority sector lending, falling short of which funds are transferred to Rural Infrastructure Development Fund (RIDF). The present study aims to analyse trends and performance patterns of priority sector lending at all Indian levels and Punjab in particular from 2004-05 to 2017-18. Comparative analysis of public and private banks has been done in India and Punjab and the impact of the crisis period on priority sector lending is also studied sector-wise. Steady CAGRs and increasing growth rates indicate a positive environment in banks concerning lending. But lack of social intent in private banks needs to be catered. This study analyses the trends and performance, pinpoints the problem areas and suggests some policy implications to improve lending to priority sectors.