What Is Priority Sector Lending ? Important Areas

Priority Sector Lending Meaning

Priority sector plays an of import role inwards the economical evolution of the country. Therefore, the Central (Federal) Government of whatsoever dry soil gives this sector priority (first preference) inwards obtaining loans from banks at a depression charge per unit of measurement of interest. This is known equally a ‘Priority Sector Lending’.

Following of import points encompass the substance pregnant of priority sector lending:

Priority sector lending system is a policy of providing a specified share of banking concern lending to the of import sectors of the economy.
It includes agriculture, small-scale industries, cottage sector, tiny sector, export sector, together with other pocket-size trouble concern (service) firms.
The Reserve Bank of Republic of Republic of India (RBI) was offset to initiate priority sector lending system inwards India.
The brain run of this system was to consider that timely together with sufficient credits (loans) are given (provided) to the priority sector.
Previously, solely world sector banks were asked to give loans to this sector. However, forthwith fifty-fifty private together with unusual banks get got to give loans to this sector.

Areas Under Priority Sector

RBI has divided the priority sector into next 10 areas or categories.

The brain areas nether priority sector lending system are equally follows:

Agriculture sector.
Small-scale industrial loans.
Small route together with H2O carry operators.
Professional together with self-employed.
Retail trade loan.
Educational loan.
Housing loan
Consumption loan
State-sponsored corporations for SC/ST.
Other recommended priority sectors.

Now let's hash out private areas nether priority sector lending i past times one.

1. Agriculture sector

In India, close one-third of its national income come upwardly from the agriculture sector. Its economical together with social evolution straight depends on the expansion of the agriculture sector. Therefore, it is treated equally primary priority sector lending inwards India.

Agricultural loans are given to the farmers on their need-based credit.

These loans are classified into next 2 categories:

1. Direct Agricultural Loans

Under this category, loans are straight given to the farmers inwards shape of tractor loan, dairy loan, crop loan, etc. These loans are given either for a short-term menses (which is non to a greater extent than than 12 months) or for a medium together with long-term menses (which is non to a greater extent than than 36 months).

Short-term loans are given to come across agricultural expenses together with maintenance of assets such equally a tractor, pumping machine, bore well, etc.
Medium together with long-term loans are given for agricultural activities similar dry soil reclamation, farm building, farm mechanization, together with thus on.

2. Indirect Agricultural Loans

Here, farmers are provided loans at concessional rates of interest. Indirect agricultural loans practise goodness the farmers inwards the long run. These loans are given for cattle feed, warehouse, seeds, pesticides, rural electrification, subscription of bonds issued past times NABARD, tedious equipments, etc.

2. Small-scale industrial loans

Loans given to small-scale together with ancillary industries are treated equally priority sector lending. These industrial units are those who practise manufacturing, processing, together with preservation of goods.

investment made inwards fixed assets must non overstep the maximum bound notified past times the Government of India. Such small-scale together with ancillary industries practise newer task opportunities inwards the market.

Small-scale together with ancillary industries include tailoring, Xeroxing, typing centers, etc.

3. Small route together with H2O carry operators

This category of borrowers includes owners of taxis, trucks, buses, auto-rickshaws, cars, bullock-carts, camel, etc. Under priority sector lending, pocket-size route together with carry operators teach loans based on the weather mentioned inwards the notification issued past times the Government of India.

The repayment menses of loan is communicated to the borrower at the fourth dimension of disbursement of loan.

Borrowing is done for the buy of vehicles together with their parts. Bank mainly provides loans for the next purposes:

Purchase of vehicles.
Purchase of spare parts.
Carrying out major repairs.
Working capital requirements.

4. Professional together with self-employed

Under this category, banking concern provides loans to professionals like:

Doctors,
Chartered accountants,
Architects,
Engineers,
Lawyers, etc.

Bank also provided loans to self-employed persons like:

Freelance journalists,
Owners of wellness help centers,
Beauty parlors,
Photographers,
Fashion designers, together with thus on.

The borrowing bound volition survive an aggregate of fixed capital together with working upper-case missive of the alphabet requirements of a professional person together with self-employed person.

Doctors together with other self-employed professionals who get practicing inwards rural or semi-urban areas are also eligible to borrow loans.

5. Retail merchandise loan

Under priority sector lending, retail trader trading inwards fertilizers, mineral oil, fair cost shops together with consumers' co-operative stores teach banking concern loans.

The loaned amount tin survive used to buy fixed assets, tools together with other equipments needed to bear on trading together with its allied activities.

Image credits © Luna Rodriguez.

6. Educational loan

Education loan is given to those students who desire to pursue higher educational activity inwards Republic of Republic of India or abroad.

Generally, banking concern provides loans to students on the next conditions:

The Government of Republic of Republic of India laid limits on the amount of educational loan taken past times students for pursuing studies inwards Indian and/or abroad.
Students may undergo graduation, post graduation (masters) programs, professional person programs together with other job-oriented diplomas.
Rate of involvement on educational loan varies inwards accordance alongside the latest ‘Finance Bill’ issued past times the Government of India.

7. Housing loan

Types of housing loan nether priority sector lending are depicted below.

Under housing loan facilities, next types of loans are available for:

Construction of a house.
Repair (maintenance) and/or renewal of a house.
Clearance of slums together with rehabilitation of disaster-stricken masses to temporary refuge shelters.

8. Consumption loan

Banks supply the consumption loan to weaker sections of social club that include pocket-size farmers, landless agricultural workers, rural artisans, barbers, washer men, carpenters, together with thus on who get got no savings inwards their hands.

money for their immediate requirements similar marriage, festivals, illnesses, etc.

Consumption loan is given for such non-productive purposes.

Here, loan bound is prescribed on each family.

9. State-sponsored corporations for SC/ST

Priority sector lending includes loans given to state-sponsored corporations for the advertisement of scheduled castes (SC) together with scheduled tribes (ST).

Banks are given liberty to determine the amount together with also the damage together with weather for these loans.

10. Other recommended priority sectors

Some other recommended priority sectors are depicted below:

These are listed together with briefly explained equally follows:

1. Software Industry

Here, loans are given to a software manufacture upwardly to a bound equally per the notification issued past times the regime of India.

Software professionals are given loans nether the category of “Loans to professionals together with self-employed”.

2. Venture Capital

If the venture upper-case missive of the alphabet projection is registered alongside ‘SEBI’ (Securities together with Exchange Board of India) together with thus it volition survive included inwards the priority sector lending.

It volition teach a loan nether priority sector lending scheme.