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Inthe changing banking sector environment concept of priority sector lending needs to be scrapped comment?
Wiki User
∙ 12y ago
The first step is to change the attitude of the commercial banks towards priority sector lending and the following steps may be adopted to achieve this objective.
1. The RBI should dispense with the present system of target-oriented lending to the priority sector and banks should be given total freedom to lend to all deserving and productive enterprises according to their own norms of lending without spoon-feeding the banks in this regard.
2. The present system of allocating 40% of lendable resources to the priority sector by every bank should not be insisted upon and all penal provisions for not achieving this level of lending to the priority sector should be withdrawn with a view to give a free hand to the banks to develop a portfolio of their choice in the interest of improving the asset quality of every bank.
3. Instead of a penalty-based system which exists at present to penalise the banks who do not reach the stipulated targets, the RBI should come out with an incentive-based system to encourage lending to the priority sector, as an incentivised system will receive better receptivity at all levels, and this will provide the necessary thrust to priority-sector lending by banks. And the incentives could be broadly on the following lines.
a) The incentives proposed could be on a staggered basis and inbuilt incentives can be provided for reaching a level of 20%, 30% and 40% of their lendable resources and incentives can be considered in Branch licensing and linking the percentages to CRR /SLR requirements.
b) A certain percentage of profit can be exempted from income-tax for those banks reaching these levels of lending to the priority sector.
c) Any other incentive could be thought of to provide impetus for lending to the priority sector.
4. All subsidies now provided to banks for lending to certain priority sectors / Govt. Sponsored Schemes should be withdrawn, and in its place, appropriate incentives should be provided so as to minimise the misuse of the subsidy system.
Wiki User
∙ 12y ago
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What are the role of priority banking officer?
to prior the bank
Changing in banking era?
As a result of the ever changing technology there has been tremendous changes in the banking era.
How did priority banking emerged in india?
Priority Banking emerged in India with the advent of foreign banks. Foreign banks usually have the habit of serving their prized/high value customers with priority service. Seeing them woo their high value customers like this, the banks in India, especially the private banks started similar service options for their valued customers. Slowly the government banks started this service as well and nowadays almost all banks in India provide priority banking services to their customers.
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Priority banking is relatively new in the Indian context. In this form of banking, the bank identifies its priority customers (often customers with deposits above 1 lakh-however this is different for each individual bank) and some special benefits are provided to these first class customers by the bank. Ex. They do not have to wait in the queue for transactions. They are assigned client relationship managers to take care of all their banking needs. These customers can use banks premises for holding meetings, can access the Internet free of cost and several other benefits are also provided. The basic purpose of this form of banking is to make the experience of banking haslefree and less time consuming. This is not to be confused with wealth management where the thrust is on providing first-class customers, customised services and expert advice on various financial needs. This is generally carried out by the wealth managers of the bank. However priority banking as part of its service offerings may include wealth management.
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