Important Points to Know About- Priority Sector Lending:
Dear Readers,here we have given the important points to know about Priority Sector Lending. 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.
· Priority Sector was first properly defined in 1972, after the National Credit Council emphasized a few years back that there should be a large involvement of the commercial banks in the priority sector. Initially in 1974, the banks were given a target of 33.33% as share of the priority sector in the total bank credit.
· This was later revised on the recommendation of the Dr. K S Krishnaswamy Committee and the target was raised to 40%. The latest working group on this segment was C S Murthy Committee in 2007, on whose recommendations, RBI revised the guidelines.
As Per Reserve Bank of India, Priority Sector includes the following:
· Small Scale Industries (including setting up of industrial estates).
· Small road and water transport operators (owning up to 100 vehicles).
· Small business (original cost of equipment used for business not to exceed Rs. 20 lakh).
· Retail Trade (advances to private retail traders up to Rs. 10 lakhs).
· Professional and self-employed persons (borrowing limit not exceeding Rs. 10 lakh of which not more that Rs. 2 lakh for working capital; in the case of qualified medical practitioners setting up practice in rural areas, the limits are Rs. 15 lakh and Rs. 3 lakh respectively and purchase of one motor vehicle within these limits can be included under priority sector).
· State sponsored organizations for Scheduled castes/Scheduled Tribes.
· Education (education loans granted to individuals by banks).
· Housing (both direct and indirect- loans up to Rs. 5 lakhs, direct loans up to Rs. 10 lakh in urban and metropolitan area). Loans up to Rs. 1 lakh and Rs. 2 lakh for repairing of houses in rural/semi urban and urban areas respectively.
· Consumption loans (under consumption credit scheme for weaker sections).
· 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.
· Loans to the software industry (having credit limit not exceeding Rs. 1 crore from the banking system).
· Loans to specified industries in the food and agro-processing sector having investment in plant and machinery up to Rs. 5 crore.
· Investment by banks in venture capital (venture capital funds/ companies registered with SEBI).
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