According to the Reserve Bank of India priority sector refers to those sectors of the economy which may not get timely and adequate credit in the absence of this special dispensation. Typically, these are 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.
What is the limit?
The government and RBI have specified a limit for the education sector, under priority sector lending. Accordingly, loans to individuals for educational purposes including vocational courses has been limited up to Rs 10 lakh for studies in India and Rs 20 lakh for studies abroad.
Rate of interest for loans under priority sector
The rate of interest on various priority sector loans will be as per directives from the Reserve Bank of India issued from time to time, which is linked to base Rate of banks at present.
Priority sector guidelines do not lay down any preferential rate of interest for priority sector loans. It's also important to understand that the base rate varies from time to time for banks and hence the education loan on priority sector lending can change.