Priority Sector Lending

PRIORITY SECTOR LENDING Some areas or fields in a country depending on its economic condition or government concern are prioritized and are called priority arenas i.e. industry, agriculture. These whitethorn further be sub divided. Banks are directed by the state bank of the country that loans must be precondition on reduced interest rates with discounts to promote these fields. such(prenominal) bestow is called priority sector lending. The different segments of the priority sector are as follows: 1.      Agriculture 2.      Small Scale Industries 3.      Small road and Water Transport Operators 4.      Retail Trade 5.      Small Business 6.      Professional and mercenary(a) persons 7.      Education 8.      Housing Finance Priority field Lending BY rbi The brass of India through the instrument of Reserve Bank of India ( rbi) mandates certain cause of lending on the Banks operating in India irrespective of their origin. RBI sets targets in terms of percentage (of total money bring by the Banks) to be lent to certain sectors, which in RBIs perception would not have had access to organized lending market or could not afford to pay the interest at the commercial rate. This type of lending is called Priority Sector Lending.

Financing of Small Scale Industry, Small business, Agricultural Activities and exportation activities fall under this category. This is also called directed credit in Indian Banking system. Financing Priority Sector in the economy is not strictly on commercial basis as not only the general approach is liberal just also the rate of interest charged on such loans is less. Export finance is, in fact, available at a discount of 20% or more on the modal(prenominal) rate of interest to Indian corporate. Part of the cost of this subsidisation is borne by RBI by means of refinancing such loans at concessional rate. Indian Banks, therefore, contribute towards economic development of the country by subsidizing the business activities undertaken by entrepreneurs in the areas which... If you want to get a full essay, order it on our website: Ordercustompaper.com

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