Priority Sector Lending
Priority sector was first properly defined in 1972, after the National Credit Council emphasized a few years back that there should be a larger involvement of the commercial banks in the priority sector.
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First of all in 1974, the banks were given a target of 33.33 % as share of the priority sector in the total bank credit.
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This was later revised on the recommendation of the Dr. K S Krishnaswamy committee and the target was raised to 40%.
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The latest working group on this segment was C S Murthy Committee in 2007, on whose recommendations, RBI revised the guidelines.
What is Priority Sector?
Broadly, priority sector includes the Agriculture Finance, Small Enterprises, Retail Trade, Micro CreditMicrocredit is the small credit given to poor and comes under the micro finance services. The commercial banks are encouraged by the RBI for expansion ....., Education Loans and housing loans. The definition came out from the Dr. K S Krishnaswamy Committee. As per Reserve Bank of IndiaThe Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934 with ....., Priority sector includes the following:
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Agriculture
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Small scale industries (including setting up of industrial estates)
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Small road and water transport operators (owning up to 10 vehicles).
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Small business (Original cost of equipment used for business not to exceed ` 20 lakh)
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Retail trade (advances to private retail traders up to ` 10 lakh)
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Professional and self-employed persons (borrowing limit not exceeding ` 10 lakh of which not more than ` 2 lakh for working capital; in the case of qualified medical practitioners setting up practice in rural areas, the limits are ` 15 lakh and ` 3 lakh respectively and purchase of one motor vehicle within these limits can be included under priority sector)
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State sponsored organizations for Scheduled Castes/Scheduled Tribes
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Education (educational loans granted to individuals by banks)
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Housing [both direct and indirect – loans up to ` 5 Lakhs (direct loans upto Rs 10 lakh in urban/ metropolitan areas), Loans upto ` 1 lakh and ` 2 lakh for repairing of houses in rural/ semi-urban and urban areas respectively].
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Consumption loans (under the consumption credit scheme for weaker sections)
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Micro-credit provided by banks either directly or through any intermediary; Loans to self help groups(SHGs) / Non Governmental Organizations (NGOs) for on lending to SHGs
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Loans to the softwareThe computer programme which contains the instructions to make the hardware work are called software. There are two primary software categories viz. Operating Systems or ..... industry (having credit limit not exceeding Rs 1 crore from the banking system)
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Loans to specified industries in the food and agro-processing sector having investment in plant and machinery up to Rs 5 crore.
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Investment by banks in venture capitalProfessional moneys co-invested with the entrepreneur usually to fund an early stage, more risky venture. Offsetting the high risk is the promise of higher return ..... (venture capital funds/ companies registered with SEBI)
