April 03, 2020

Priority sector/ Priority sector Lending/ANBC/Weaker section

Priority Sector Lending: Do you now about the Priority Sector Lending Scheme of RBI? What is Priority Sector? What is Priority Sector lending? What is Priority Sector Lending Certificate?
If you know then just go this post for a quick revision. If you don't then read this post thoroughly.  
What is Priority Sector Lending? A Meeting of National Credit council was held in 1968 after this meeting RBI constituted informal study group in 1971 and Formalized a scheme in 1972. The scheme was revised in the year 2007 by an internal study group of RBI. The Scheme was reviewed by the Nair Committee in August 2011 and also by Nachiketmore Committee. Farmers with land holding up to 1 hectare is known as small farmers and Farmers with land more than one hectare and up to two hectare is known as marginal farmers.                                        Weaker Section: ( i) small and marginal farmers (ii) self help groups (iii) villages and cottage industry (iv) Banificiaries of all government sponsore scheme. (v) person with disabilities (vi) sc/ST category (vii)Minory category as may be notified by government of India time to time.
Priority Sector Lending is an important role given by the Reserve Bank of India (RBI) to the banks for providing a specified portion of the bank lending to few specific sectors like agriculture and allied activities, micro and small enterprises, poor people for housing, students for education and other low income groups and weaker sections. This is essentially meant for an all round development of the economy as opposed to focusing only on the financial sector
The Reserve Bank of India has put in a framework wherein banks are required to lend a certain percent of there loans to priority sector. Suppose presently the Priority Sector Lending target is fixed at 40%, which means that if a bank has given loans worth Rs 100 Crores then out of these Rs 40 Crore loan must be given to Priority Sector.  
What are Priority Sectors? Priority sector is a sector which may not get adequate institutional Credit due to social,cultural and economic reason. Priority sector first time defined by Mr.s K.S Krishna Swami Committee.
The Reserve Bank of India has identified these 8 categories as Priority Sector:
Agriculture,Micro, Small and Medium Enterprises,Export, Credit,Education,Housing,Social Infrastructure,Renewable Energy Others
Loans to these sector will be counted as loans under the Priority Sector and banks have to comply to this norm by RBI.
What is ANBC:– Adjusted Net Bank Credit- In simple language and as of now just understand it as the total loans given by the bank. 
Target for Priority Sector Lending
The RBI has set target for banks for lending to priority sector in terms of percentage of ANBC. Also for some category like agriculture, MSME etc. RBI has set sub-target for lending. The same is given in the table below. The table is applicable for Domestic scheduled commercial banks and foreign banks with 20 branches and above.
Category Lending PercentageTotal Priority Sector 40% of ANBC Agriculture 18% of ANBC.    8% of 18% - for Small and marginal farmers     Micro Enterprises 7.5% of ANBC Advances to Weaker Sections 10% of ANBC
Note: This is only the minimum level of lending prescribed by RBI. Banks can lend even more than this. 
Total Priority Sector lending for Foreign banks with less than 20 branches
The Total Priority Sector target of 40 percent for foreign banks with less than 20 branches has to be achieved in a phased manner as mentioned below:
Financial Year Percentage of Lending 2018-19 38% of ANBC. 2019-20 40% of ANBC. 2% increase per year- 2015-16- 32% of ANBC,2016-16 - 34% of ANBC, 2017-18 36% of ANBC, 2018-18- 38% of ANBC,2019-20- 40% of ANBC.
Details of Priority Sectors
Agriculture– It will include (i) Farm Credit  (ii) Agriculture Infrastructure and (iii) Ancillary Activities.         Direct finance to agriculture shall include short, medium and long term loans given for agriculture and allied activities directly to individual farmers, Self-Help Groups (SHGs) or Joint Liability Groups (JLGs) of individual farmers without limit and to others (such as corporate, partnership firms and institutions) up to Rs. 20 lakh, for taking up agriculture/allied activities.
Micro, Small and Medium Enterprises:-
Manufacturing Sector Enterprises Investment in plant and machinery Micro Enterprises< Rs 25 Lakhs Small Enterprises Rs 25 lakhs to Rs 5 Crore Medium Enterprises Rs 5 Crore to Rs 10 Crore
Service Sector:-  Enterprises Investment in equipment Micro Enterprises< Rs 10 lakhs Small EnterprisesRs 10 lakhs to Rs 2 Crore Medium Enterprises Rs 2 Crore to Rs 5 Crore
Education:– Education loans include loans and advances granted to only individuals for educational purposes up to Rs. 10 lakh for studies in India and Rs. 20 lakh for studies abroad, and do not include those granted to institutions;
Housing:– Eligible loan amount is mentioned below:
Place Maximum Eligible Loan Cost of house 
should not exceed Metropolitan 35 lakhs 45 lakhs Other 25 lakhs 30 lakhs Maximum loan for repair of house in metropolitan area- Rs 5 lakhs Maximum loan for repair of house in other centers- Rs 2 lakhs
Social infrastructure– Bank loans up to a limit of Rs 5 Crore per borrower for building social infrastructure for activities namely schools, health care facilities, drinking water facilities and sanitation facilities including construction/ refurbishment of household toilets and household level water improvements in Tier II to Tier VI centres.
Renewable Energy:– If a person or organisation wants loan for purposes like solar based power generators, biomass based power generators, wind mills, micro-hydel plants and for non-conventional energy based public utilities viz. street lighting systems, and remote village electrification then the limit for same is:
For organisations- Rs 15 CroreFor individual- Rs 10 Lakh
Others–The following categories come under others as defined by RBI
Category Maximum Loan Restriction Individual Rs. 50,000 Maximum Annual Income
in rural area = Rs 1 lakh
in Urban area= Rs 1.6 lakh Loans to distressed personsRs 1 lakh other than farmers
Priority sector loans to Weaker Section:-
Priority sector loans to the following borrowers will be considered under Weaker Sections category:-
No.Category (1) Small and Marginal Farmers (2) Artisans, village and cottage industries where individual credit limits do not exceed ₹0.1 million (3) Beneficiaries under Government Sponsored Schemes such as National Rural Livelihood Mission (NRLM), National Urban Livelihood Mission (NULM) and Self Employment Scheme for Rehabilitation of Manual Scavengers (SRMS) (4) Scheduled Castes and Scheduled Tribes (5) Beneficiaries of Differential Rate of Interest (DRI) scheme (6) Self Help Groups (7) Distressed farmers indebted to non-institutional lenders (8) Distressed persons other than farmers, with loan amount not exceeding ₹0.1 million per borrower to prepay their debt to non-institutional lenders (9) Individual women beneficiaries up to ₹0.1 million per borrower (10) Persons with disabilities (11) Overdraft limit to PMJDY account holder upto ₹ 10,000/- with age limit of 18-65 years. (12) Minority communities as may be notified by Government of India from time to time.
Note:- No loan related and adhoc service charges can be levied on priority sector loans up to ₹25,000. 
Priority Sector Lending Targets /Sub-targets for Regional Rural Banks
RRBs will have a target of 75 per cent of their outstanding advances for priority sector lending and sub-sector targets as indicated in table below.
CategoriesTargets:- Total Priority Sector 75 per cent of total outstanding Agriculture18 per cent of total outstanding Small and Marginal Farmers 8 percent of total outstanding Micro Enterprises 7.5 per cent of total outstanding Weaker Sections 15 per cent of total outstanding.                     

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