Presented By:-

Abhaysinh Mohite 11327

Akshay Sonone 11346

Vijay Patil 11352

Toshit Tambade 11357

•Priority sector-Some areas or fields in a country depending on its economic condition or government interest are prioritized and are called priority sectors i.e. SMEs, agriculture. these may further be sub divided.• Priority sector lending-Banks are directed by the central bank of the country that loans must be given on reduced interest rates with discounts to promote these fields. Such lending is called priority sector lending

  The concept of Priority Sector Lending is mainly

intended to ensure that assistance from banking system should flows in an increasing manner to those sectors of the economy which though accounting for a significant proportion of the national product have not received adequate support of institutional finance in the past

At the meeting of National Credit Council held in JULY 1968, it was emphasized that commercial banks should increase their involvement in the financing of priority sector i.e. agriculture and small scale industries. The description of priority sector was later formalised in 1972

1.      Agriculture2.      Small Scale Industries3.      Small Road and Water Transport

Operators4.      Retail Trade5.      Small Business6.      Professional and Self-employed persons7.      Education8.      Housing Finance

Agricultural sector suffers from several challenges, namely,

i. Fragmented and uneconomical size of landholding; 83 per cent of the landholdings are held by small & marginal farmers and average landholding size is 0.6 ha3 per farm household;

ii. High wastage due to inadequate storage and supply chain infrastructure. Estimates indicate that 7 per cent of grain output, 10 per cent of seeds and 25 per cent to 40 per cent of fruits and vegetables are wasted every year ;

iii. Significant dependence on monsoon and inadequacy of irrigation facilities;

iv. Low level of farm mechanization;v. Inadequacy of extension services in agriculture

SMALL SCALE INDUSTRIES Those engaged in the manufacture, processing or preservation of goods.

Investment in plant and machinery doesn’t exceed 1 crore

TINY ENTERPRISES: small scale units where investment is upto Rs 25 lakh.

SMALL SCALE SERVICE AND BUSINESS ENTERPRISES: industry related service and business enterprises with investment upto 10 lakh in fixed assets excluding land and building.

Indirect finance will include credit to: Agencies involved in assisting the decentralized sector Govt. sponsored corp. providing funds to weaker sec. Advances to handloom cooperatives Credit provided by banks to KVIC

Role of Micro & Small Enterprises (MSE) sector is vital for employment generation, promoting entrepreneurship and overall economic growth.

Inadequate credit assistance. Lack of machinery and equipment Competition from large-scale units and imported

articlesAbsence of adequate infrastructureIrregular supply of raw material

• To get out of vicious poverty circle: 70 % of Indian population lives below poverty line, 33% of global poor are Indians

buying land or equipmentexpanding a business

improving housing securing a job (which often requires paying

a large bribe), etc to reduce unemployement

Education is one of the factors which will enable us optimize and leverage our demographic dividend

Education is an investment that augments the stock of human capital over a period

Education loans extended by banks have brought higher education within the reach of the deserving poor and brought it to the masses

Improved training and skilling are critical for providing employment opportunities to the growing mass of younger people and necessary to sustain the high growth momentum

The needs of education, skill and capacity building necessitate adequate flow of credit to this sector

Nature Domestic banks (both public and private)

Foreign banks operating in India

Total priority sector advances

40%of NBC 32%of NBC

Total agricultural advances

18%of NBC No target

SSI advances No target 10%of NBC

Advances to weaker section

10%of NBC No target

Export credit Export credit doesn’t form part of priority se

12%of NBC

RATE OF INTEREST OF LOANS UNDER PRIORITY SECTOR?

AS per the current interest rate policy, in the case of loans upto Rs 2 lakh, the interest rate should not exceed the prime lending rate (PLR) of the bank, while in the case of loans above Rs 2 lakh, banks are free to determine the interest rate.

MONITORING OF PRIORITY SECTOR LENDING BY RESERVE BANK

Priority sector lending by commercial banks is monitored by Reserve Bank of India through periodical Returns received from them. Performance of banks is also reviewed in the various fora set up under the Lead Bank Scheme (at State, District and Block levels).

M V NAIR , Union Bank Chief, Head of RBI committee

Priority sector targets for public sector and private sector banks could be retained at the current level of 40% of the net credit to the sector.

It has recommended severe changes should be made to exposure of foreign banks. Foreign banks’ priority sector target should be upped from 32% to 40%. However, this could put pressure on foreign banks to increase their lending to priority sector categories including agriculture and export sectors.

> Special treatment should be given to small and marginal farmers and housing loans below Rs 2 lakhs should be classified under priority sector

RBI had been a little cautious of a bank lending to NBFCs, but the committee has recommended that 5% of bank's credit to NBFCs could be classified priority sector. Lending to gold companies will not be classified as priority sector.

Securitized loans could also be classified under the priority sector. This will remove the pressure on banks and NBFCs while lending to these sectors. It would come as a relief for banks and NBFCs.

Increasing role of private sector

Effective working and monitoring

To contribute to development of economy

To maintain healthy competition

To achieve the target of financial inclusion

In order to address to the growing need of the economy , the private sector bank must work hand in hand with the public sector banks as suggested by the RBI

Only lending will not suffice the need of the hour ,the banks must also focus on:

1)Better application of Asset and Risk Management

2)Reducing the extent of NPAs

3)Assisting borrowers in achieving financial goals

THANK YOU