Priority Sector Lending

Priority Sector Lending

Priority sector was first properly defined in 1972, after the National Credit Council emphasized a few years back that there should be a larger involvement of the commercial banks in the priority sector. First of all 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. What is Priority Sector? Broadly, priority sector includes the Agriculture Finance, Small Enterprises, Retail Trade, Micro Credit, Education Loans and housing loans. The definition came out from the Dr. K S Krishnaswamy Committee. As per Reserve Bank of India, Priority sector includes the following: 1. 2. 3. 4. 5. 6. Agriculture Small scale industries (including setting up of industrial estates) Small road and water transport operators (owning up to 10 vehicles). Small business (Original cost of equipment used for business not to exceed ` 20 lakh) Retail trade (advances to private retail traders up to ` 10 lakh) Professional and self-employed persons (borrowing limit not exceeding ` 10 lakh of which not more than ` 2 lakh for working capital; in the case of qualified medical practitioners setting up practice in rural areas, the limits are ` 15 lakh and ` 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 (educational loans granted to individuals by banks) Housing [both direct and indirect – loans up to ` 5 Lakhs (direct loans upto Rs 10 lakh in urban/ metropolitan areas), Loans upto ` 1 lakh and ` 2 lakh for repairing of houses in rural/ semi-urban and urban areas respectively]. Consumption loans (under the consumption credit scheme for...