- DOI: 10.22271/ALLRESEARCH.2020.V6.I12F.8136
- Corpus ID: 232634850
Priority sector lending in India: Revisiting the issue under new guidelines of RBI
- Nilofar Bano , Manisha Sharma
- Published 2020
- Economics, Business
- International journal of applied research
Tables from this paper
One Citation
Directed lending system in india: a review, 11 references, priority sector advances: trends, issues and strategies, an analysis of npas in priority and non-priority sectors with respect to public sector banks in india, related papers.
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Determinants of Priority Sector Lending: Evidence from Bank Lending Patterns in India
The International Journal of Business and Finance Research, v. 10 (20 p. 55-80)
26 Pages Posted: 19 Dec 2016
Muneesh Kumar
Department of Financial Studies, University of Delhi
Neetika Batra
School of Inspired Leadership
Florent Deisting
Date Written: 2016
Mandatory directed credit or priority sector lending (PSL) is part of the regulatory framework for commercial banks/financial institutions in many countries, both developing and developed. However, compliance and lending effectiveness of such programs may be determined by a host of factors. This may be particularly so in developing countries, where availability of finance for the vulnerable sectors like agriculture, small businesses, weaker sections, is scarce. The present paper aims at examining the patterns of priority sector lending by banks, with a view to identifying the factors which determine this lending, and implementation challenges for lending by banks in such programs. The paper is based on an analysis of secondary data relating to priority sector lending (1998-2014) for eighty banks in India, and is supported by findings from the survey of ninety-seven lending officers of various banks. The results indicate gaps in patterns of the sect oral target compliance by different bank groups, along with the lending preferences and challenges faced by banks in such lending. It also identifies bank-specific characteristics like the nature of ownership, size, performance, etc., which have a significant impact on the priority sector lending patterns. Based on its findings, the paper offers policy suggestions for improving the effectiveness of priority sector lending program.
Keywords: Banks, Directed Credit Program, Priority Sectors, Bank Ownership, Small Business Credit
JEL Classification: G21, G34, O16
Suggested Citation: Suggested Citation
Muneesh Kumar (Contact Author)
Department of financial studies, university of delhi ( email ).
South Campus, Benito Juarez Road Delhi, New Delhi 110021 India
School of Inspired Leadership ( email )
Esc pau ( email ).
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Priority Sector Lending in India by Public and Private Sector Banks: A Comparative Analysis
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- 3.1 Priority Sector Lending Norms
- 3.1.1 Why in the News?
- 3.1.2 Revised Priority Sector Lending Norms
- 3.1.3 About Priority Sector Lending (PSL)
- 3.1.4 Categories under Priority Sector
- 3.1.5 Targets /Sub-targets for Priority sector Lending for Different Types of Banks
- 3.1.6 Positive Impact of priority sector lending on Indian economy:
- 3.1.7 Issues with PSL
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Revised Priority Sector Lending Norms
Posted 27 Jul 2024
Why in the News?
RBI revises priority sector lending (PSL) guidelines to promote small loan in economically disadvantaged districts with low average loan sizes.
- More weight (125%) will be given to fresh priority sector loans in districts where loan availability is low (less than Rs 9,000 per person).
- Disincentive framework: In districts with high loan availability (more than Rs 42,000 per person), the loans will have a weight of 90%.
- Other districts : With exception of outlier districts with low credit availability and those with high loan sizes, all other districts will continue to have the current importance level of 100%.
- MSME loans: All bank loans to MSMEs shall qualify for classification under PSL.
About Priority Sector Lending (PSL)
- Priority Sector means those sectors which Government and RBI consider as important for development of the country and are to be given priority over other sectors.
- To ensure that vulnerable sections of society and underdeveloped areas get access to credit .
- To direct a portion of bank credit to specified sectors and sub-sectors that impact large segments of the population and are crucial for the economy.
- PSL was formalized in 1972 to facilitate flow of credit to such sectors, which though creditworthy, are unable to access credit from formal financial institutions.
- Gadgil Committee, 1969 recommended adoption of Area Approach based on which ‘Lead Bank Scheme’ was adopted.
- Ghosh Committee (1982 ) in which Priority sector categories very revised.
|
| |
| |
Small and Marginal Farmers | Beneficiaries of Differential Rate of Interest (DRI) scheme (1972), NRLM, NULM, Self-Employment Scheme for Rehabilitation of Manual Scavengers (SRMS) |
Distressed farmers indebted to non-institutional lenders | Persons with disabilities |
Artisans, village and cottage industries | Individual Women |
SCs and STs | Minority communities as notified by Government of India |
SHGs | Distressed persons other than farmers |
|
|
|
|
|
| 40% of ANBC or Credit Equivalent of Off-Balance Sheet Exposures (CEOBE), whichever is higher |
| 75% of ANBC or CEOBE whichever is higher | 75% of ANBC or CEOBE whichever is higher. |
| 18% of ANBC or CEOBE, whichever is higher; out of which a target of 10% is prescribed for Small and Marginal Farmers | Not applicable |
| Same as Domestic commercial bank |
| 7.5% of ANBC or CEOBE, whichever is higher | Not applicable |
| Same as Domestic commercial bank |
| 12%of ANBC or CEOBE, whichever is higher | Not applicable | 15% of ANBC or CEOBE, whichever is higher | Same as Domestic commercial bank |
Priority Sector Lending guidelines is also applicable on Primary Urban Co-operative Banks. | ||||
Positive Impact of priority sector lending on Indian economy:
- Financial Inclusion: PSL norms ensure that credit reaches under banked segments of population e.g. SMFs, women, and weaker sections.
- Support to Agriculture: Agricultural credit increased from 2000 to 2020 at a compound annual growth rate (CAGR) of 19.81% due to mandatory 18% lending by commercial banks & other policies.
- Promotion of MSMEs : By facilitating credit flow to MSMEs, PSL helps in creating jobs and boosting local economies.
- Income Augmentation: A case study of Andhra Pradesh showed that Beneficiaries reported enhanced income.
Issues with PSL
- According to some studies, PSL was found responsible for more NPA generation and writing-off of NPA as well.
- Increased costs : PSL increased administrative and transactional cost of banks.
- Other issues with PSL : Low banks Profitability, increased Government Interference etc.
Way-forward
- Strengthen Microfinance Institutions and Encourage Opening of “Small” Finance Banks: MFIs could significantly increase the credit supplied to unbanked rural and semi-urban areas through their vast distribution network and business model of “last mile connectivity.”
- Use of Technology: E.g. Mobile banking app for loan approval to farmers to Reduce Cost of Credit Delivery and increase the reach and efficiency of PSL, especially in rural and remote areas.
- Create a robust credit infrastructure and Risk Assessment Tools: To better evaluate the creditworthiness of borrowers and reduce the incidence of Non-Performing Assets (NPAs).
- priority sector lending
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COMMENTS
An Analysis of NPAs In Priority and Non-Priority Sectors with respect to Public Sector Banks in India, International Journal of Applied Research, ISSN 2018,2394-5969. Revised Priority Sector ...
Dave, D. K. 2016, A Study of Priority Sector Lending for Selected Public Sector Banks of India, International Journal of Research and Analytical Reviews, 3(3), 84-86. Show more Recommended ...
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. Com- parative 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.
Abstract. Priority sector lending is undoubtedly one of the most appreciable reforms initiated by Government of India to ensure the betterment of lagging and deprived groups of society. As per the directives of RBI all scheduled commercial banks from public as well as private sector are hereby under compulsion to lend at least 40 per cent of ...
This research aims to explore the factors influencing Priority Sector Lending (PSL) in India, with a specific focus on both bank-specific and macroeconomic variables.
The present paper aims at examining the patterns of priority sector lending by banks, with a view to identifying the factors which determine this lending, and implementation challenges for lending by banks in such programs. The paper is based on an analysis of secondary data relating to priority sector lending (1998-2014) for eighty banks in ...
The banking sector plays a vital role in the development of the economy and the role of bank credit in economic development cannot be neglected. For removal of poverty and equitable distribution of income, various credit arrangements have been arranged by RBI off and on and one of them is Priority Sector Lending. In Priority Sector Lending, credit is given to those sectors which are ...
of priority sector lending by banks, with a view to identifying the factors which determine this lending, and implementation challenges for lending by banks insuch programs. The paper is based on analysis of an secondary data relating to priority sector lending (1998-2014) for eighty. banks in India, and is supported
This paper analyses the structure of priority sector lending in India over a period of time starting from 2001 to 2014. 2.0 Research Methodology The main objective of the paper is to analyse the level and structure of priority sector lending in India during the 21st century.
Research off-campus without worrying about access issues. Find out about Lean Library here. ... This article attempts to present the effect of the transition in the priority sector lending needs, reforms in the current context of shifting value systems and the necessity to build our banks along the sound lines to meet our economy's expanding ...
Priority Sector Lending in India 23-32 3.1 Evolution of Priority Sector Lending in India 23 3.2 List of Priority Sectors identified in India 23 3.3 Priority Sector Lending (PSL) Norms and Targets 24 3.4 Categories under Priority Sector 26 3.5 Alternative avenues to meet Priority Sector Lending Target 32
The objective of this research paper is to analyze lending levels and structure within the priority sector over the past ten years. The entire study of this paper is based upon secondary data, collected from the various relevant issues published by RBI and from other reliable sources of 12 public sector banks and 21 private sector banks ...
of the priority sector did not receive subsidy from the commercial banks. Approximately 85% of respondents from agriculture do not received su. sidy which followed by 78% in MSE sector and 71% in other priority areas. Least beneficiaries who have received loan subsidy are. Table: 11 Availing of Loan subsidy. Sector.
However, these developments notwithstanding, the priority sector lending in India is characterized by a relatively higher incidence of non-performing assets when compared to the other segments. 3. Objectives 1. To analyze advances to Priority as well as Non Priority Sector in Nationalized, Public & ... The scope of the Research Paper covers the ...
PRIORITY SECTOR LENDING - A REVIEW. -Dr. S. Vijay Kumar. The origin of priority sector prescriptions for banks in India can be traced to the Credit. Policy for the year 1967-68, wherein it was ...
62 Bodhi International Journal of Research in Humanities, Arts and Science Vol. 5 No. 3 April 2021 E-ISSN: 2456-5571 Priority Sector Lending: Issues and Strategies CHINMAY MODI Research Scholar, SD School of Commerce Gujarat University, Ahemedabad Abstract Lending to priority sectors became an important part of the national program after the ...
Elizabeth James. [email protected]. Le. ding by Ba. ks to NBFCs for On-lending to Priority Sectors: Recent RBI Guidelines and Way Forward1. BackgroundCertain sectors of the economy are classified by the Government of India (GoI) and Reserve. Bank of India (RBI) as priority sectors and SCBs have been directed to lend money to these sectors ...
An Empirical Study of Priority Sector Lending for Selected Public Sector Banks of India Dr. Deepak Kumar, Dr. Bhanu Pratap, Mr. Ajay Kumar ... Various article and research papers from internet have also been used. Period of study cover five years from 2014-15 to 2017-18. One Way ANOVA and F- test was used to test the hypothesis.
C in priority sector during the first phase and 42.92 per cent during the second phase. The analysis revealed that in the all years (Except 2013) of the first phase of study the prescribed target of. priority sector lending was achieved (i.e. 40.00 per cent) by the private sector banks. During the second phase of the study, the prescri.
Academia.edu is a platform for academics to share research papers. Priority Sector Lending in India by Public and Private Sector Banks: A Comparative Analysis (PDF) Priority Sector Lending in India by Public and Private Sector Banks: A Comparative Analysis | provinder kumar - Academia.edu
Madhya Pradesh, India f have been done in priority Sector lending as per th players in the development of the economy are commercial banks in general and public same line, new guidelines have been issued by RBI for Priority Sector Lending on September and have been assigned priority for development are included in Priority sect 2
Positive Impact of priority sector lending on Indian economy: Financial Inclusion: PSL norms ensure that credit reaches under banked segments of population e.g. SMFs, women, and weaker sections. Support to Agriculture: Agricultural credit increased from 2000 to 2020 at a compound annual growth rate (CAGR) of 19.81% due to mandatory 18% lending by commercial banks & other policies.
Priority Sector Lending scheme, is a tool to channelize. financial resources towards important sectors of an economy and for that targets and sub-. targets are set by Reserve Bank of India for ...
NPA data is explained by priority sector lending. Baijal (2015), Goyal, Agrawal and Agrawal (2015) [3] concluded that priority sector lending is a major contributor to NPAs in public and private sector banks. These studies indicate that there is a significant contribution of priority sector lending towards the NPAs in public sectors banks.
Reforms in certain customs and banking rules, access to credit, and incentives at par with China will be key for India to boost its exports through e-commerce medium to $350 billion by 2030, think tank GTRI said on Monday. The Global Trade Research Initiative (GTRI) report also suggested creation of ...