What Is Priority Sector Lending ? Pregnant 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 whatever province gives this sector priority (first preference) inwards obtaining loans from banks at a depression charge per unit of measurement of interest. This is known every bit a ‘Priority Sector Lending’.

Following of import points encompass the nitty-gritty pregnant of priority sector lending:

1. Priority sector lending system is a policy of providing a specified percentage of banking company lending to the of import sectors of the economy.
2. It includes agriculture, small-scale industries, cottage sector, tiny sector, export sector, too other small-scale concern (service) firms.
3. The Reserve Bank of Bharat (RBI) was commencement to initiate priority sector lending system inwards India.
4. The principal work of this system was to reckon that timely too sufficient credits (loans) are given (provided) to the priority sector.
5. Previously, entirely world sector banks were asked to give loans to this sector. However, instantly fifty-fifty private too unusual banks create got to give loans to this sector.

Areas Under Priority Sector

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

The principal areas nether priority sector lending system are every bit follows:

1. Agriculture sector.
2. Small-scale industrial loans.
3. Small route too H2O carry operators.
4. Professional too self-employed.
5. Retail trade loan.
6. Educational loan.
7. Housing loan
8. Consumption loan
9. State-sponsored corporations for SC/ST.
10. Other recommended priority sectors.

Now let's hash out private areas nether priority sector lending 1 yesteryear one.

1. Agriculture sector

In India, nigh one-third of its national income come upward from the agriculture sector. Its economical too social evolution straight depends on the expansion of the agriculture sector. Therefore, it is treated every bit primary priority sector lending inwards India.

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

These loans are classified into next ii categories:

1. Direct Agricultural Loans

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

1. Short-term loans are given to encounter agricultural expenses too maintenance of assets such every bit a tractor, pumping machine, bore well, etc.
2. Medium too long-term loans are given for agricultural activities similar solid reason reclamation, farm building, farm mechanization, too thus on.

2. Indirect Agricultural Loans

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

2. Small-scale industrial loans

Loans given to small-scale too ancillary industries are treated every bit priority sector lending. These industrial units are those who create manufacturing, processing, too preservation of goods.

investment made inwards fixed assets must non travel yesteryear the maximum bound notified yesteryear the Government of India. Such small-scale too ancillary industries create newer task opportunities inwards the market.

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

3. Small route too H2O carry operators

This category of borrowers includes owners of taxis, trucks, buses, auto-rickshaws, cars, bullock-carts, camel, etc. Under priority sector lending, small-scale route too carry operators learn loans based on the atmospheric condition mentioned inwards the notification issued yesteryear the Government of India.

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

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

1. Purchase of vehicles.
2. Purchase of spare parts.
3. Carrying out major repairs.
4. Working capital requirements.

4. Professional too self-employed

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

1. Doctors,
2. Chartered accountants,
3. Architects,
4. Engineers,
5. Lawyers, etc.

Bank also provided loans to self-employed persons like:

1. Freelance journalists,
2. Owners of wellness tending centers,
3. Beauty parlors,
4. Photographers,
5. Fashion designers, too thus on.

The borrowing bound volition hold upward an aggregate of fixed capital too working working capital alphabetic quality requirements of a professional person too self-employed person.

Doctors too other self-employed professionals who laid about 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 toll shops too consumers' co-operative stores learn banking company loans.

The loaned amount tin terminate hold upward used to buy fixed assets, tools too other equipments needed to acquit on trading too its allied activities.

Image credits © Luna Rodriguez.

6. Educational loan

Education loan is given to those students who desire to pursue higher teaching inwards Bharat or abroad.

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

1. The Government of Bharat laid limits on the amount of educational loan taken yesteryear students for pursuing studies inwards Indian and/or abroad.
2. Students may undergo graduation, post graduation (masters) programs, professional person programs too other job-oriented diplomas.
3. Rate of involvement on educational loan varies inwards accordance alongside the latest ‘Finance Bill’ issued yesteryear 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:

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

8. Consumption loan

Banks supply the consumption loan to weaker sections of club that include small-scale farmers, landless agricultural workers, rural artisans, barbers, washer men, carpenters, too thus on who create 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) too scheduled tribes (ST).

Banks are given liberty to determine the amount too also the damage too atmospheric condition for these loans.

10. Other recommended priority sectors

Some other recommended priority sectors are depicted below:

These are listed too briefly explained every bit follows:

1. Software Industry

Here, loans are given to a software manufacture upward to a bound every bit per the notification issued yesteryear the regime of India.

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

2. Venture Capital

If the venture working capital alphabetic quality projection is registered alongside ‘SEBI’ (Securities too Exchange Board of India) thus it volition hold upward included inwards the priority sector lending.

It volition learn a loan nether priority sector lending scheme.