More focus to be laid on priority sector lending
By Vaibhav Aggarwal
Dec 21, 2009
Print    Email    RSS   

The Finance Ministry may ask government-owned banks to set internal targets within the overall priority sector lending to ensure a smooth flow of funds to segments such as agriculture, small industries and the marginalized sections of the society.

According to a senior finance ministry official the proposal seeks to ensure that banks meet specific targets in terms of lending to each of the mentioned priority segments. These banks will be held responsible for meeting these targets.

The existing RBI guidelines mandate the banks to lend at least 40 percent of their adjusted net bank credit to such specified segments.

During the previous financial year, only three public sector banks- Central Bank of India, State Bank of Mysore and State Bank of Patiala- had not achieved the overall priority lending target. 13 banks missed lending targets for agriculture and 12 missed the targets for weaker sections.

This target is calculated by adjusting for some exemptions, which also includes certain investments. It is calculated with reference to the outstanding amount at March 31 of the previous year.

Out of the mandated 40 percent, banks are required to lend at least 18 percent of their net bank credit to the agriculture sector and the balance to other specified sectors.

Banks are also required to lend 10 percent of adjusted net bank credit to weaker sections. Presently most banks fall short of this target.

The ministry's move is in line with RBI's attempts to move loans to housing finance companies by banks out of the priority sector lending targets so that the deserving segments get the benefits.

"It has been brought to our notice that certain banks are extending short-term loans of tenures ranging from six months to one year to housing finance institutions, and classifying them as priority sector advances," the RBI said in a circular.


(Comments Posted : 0) Post Your Comments
Show All Comments
 Select a product:

 Select a product:

Managing loans through difficult times
Carnival of Indian Personal Finance Blogs #1
Tata Nano: How would Bank Loans look
Credit profile and its effect on loan...
Carnival of Indian Personal Finance Blogs # 8

Hello I am looking to renew my car insurance and I...
my loan no

SBH bank extended its Car and gold loan campaign till 31st March, 2015. Feb 11, 2015
KVGB bank signed MOU with TATA Motors Feb 10, 2015
SBH bank extended its scheme offering concession to loan defaulters Feb 2, 2015
Karnataka Bank tied up with TVS motors to Assist Auto rickshaw buyers Jan 27, 2015
RBI extended the Directions issued to Amanath Co-operative Bank for a period of six months Jan 22, 2015
News Archive