What are the areas under priority sector lending that banks have to follow?

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What are the areas under priority sector lending that banks have to follow?
There are certain sectors of the economy that require greater assistance to bolster growth. These include small value loans to farmers for agriculture and allied activities, micro and small enterprises, poor people for housing, students for education and other low income groups and weaker sections.

The Reserve Bank of India (RBI) has categorised priority sector lending into the following categories:

(i) Agriculture

(ii) Micro and Small Enterprises

(iii) Education

(iv) Housing

(v) Export Credit

(vi) Others

Banks have to often lend to these sectors and in the past have complained that the huge non performing assets is primarily on account of the priority sector lending that the banks have to follow.

However, the government continues to lay an emphasis on bolstering growth for those that are in utmost need of credit. It's primarily to lend to the weaker sections of Society. Now, what constitutes weaker sections of society is extremely important.

According to the Reserve Bank of India, the following would constitute weaker sections.

(a) Small and marginal farmers;

(b) Artisans, village and cottage industries where individual credit limits do not exceed 50,000;

(c) Beneficiaries of Swarnjayanti Gram Swarozgar Yojana (SGSY), now National Rural Livelihood Mission (NRLM);

(d) Scheduled Castes and Scheduled Tribes;

(e) Beneficiaries of Differential Rate of Interest (DRI) scheme;

(f) Beneficiaries under Swarna Jayanti Shahari Rozgar Yojana (SJSRY);

(g) Beneficiaries under the Scheme for Rehabilitation of Manual Scavengers (SRMS);

(h) Loans to Self Help Groups;

(i) Loans to distressed farmers indebted to non-institutional lenders;

(j) Loans to distressed persons other than farmers not exceeding Rs 50,000 per borrower to prepay their debt to

non-institutional lenders;

(k) Loans to individual women beneficiaries upto Rs 50,000 per borrower;


Information Courtesy: Reserve Bank of India

Story first published: Saturday, February 22, 2014, 9:03 [IST]
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