Unit – 20 : Priority Sector Advances
- RBI has advised the banks to raise the shares of priority sector lending to 40 % of the aggregate bank advances.
- Out of this 40 %, 18 % is for agricultural sector (no targets for foreign banks), 10 % is for weaker sections (no targets for foreign banks), and 1 % of previous year’s total advances are given under DRI (Differential Rate of Interest Scheme) (no targets for foreign banks).
- Above mentioned limit is for domestic commercial banks. For foreign banks, 32 % of ANBC (Adjusted Net Bank Credit) is for priority sector advances.
- Export credit is not a part of priority sector for domestic commercial banks. However foreign banks are given target of 12 % of ANBC.
- Description of Micro, Small and Medium Sectors:
Investment in plant and machinery Investment in Equipment Type of Enterprise (Manufacturing Sector) – (Services Sector)
Up to 25 lacs – up to 10 lacs Tiny
25 lacs to 5 crore – 10 lacs to 2 crore Small
- crore to 10 crore – 2 crore to 5 crore Medium
- Micro credit includes provision of very small amounts up to Rs 50,000 per borrower.
- The government has decided that the farmers should receive short term credit at 7 % with an upper limit of 3 lakh on the principal amount. On this amount, the government provides interest subvention of 2 % p.a. to the banks.
- This 2 % subvention will be available to banks on condition that they make short term credit available at the ground level with ROI of 7 % p.a.