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What is priority sector lending in banks?


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2008-09-23 03:10:32
2008-09-23 03:10:32

Some areas or fields in a country depending on its economic condition or government interest are prioritized and are called priority sectors i.e industry, agriculture. these may further be sub divided. Banks are directed by the state bank of the country that loans must be given on reduced interest rates with discounts to promote these fields. Such lending is called priority sector lending

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Other than priority sector lending i.e. education,agriculture,housing etc...these all are priorty sector lendings. And like personal loan,credit card all these are count in non priority lending. Diffrence is interest rate is high for non priority lending. Government is too cautious for priority lending because it can boost our indian economy.

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not be insisted upon and all penal provisions for not achieving this level of lending to the priority sector should be withdrawn with a view to give a free hand to the banks to develop a portfolio of their choice in the interest of improving the asset quality of every bank. 3.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.

Some areas or fields in a country depending on its economic condition or government interest are prioritized and are called priority sectors i.e industry, agriculture. these may further be sub divided. Banks are directed by the state bank of the country that loans must be given on reduced interest rates with discounts to promote these fields. Such lending is called priority sector lending .

is privet banks comes in money lending act criteria

REASONS- 1.current macroeconomic situation in the country. 2.increased interest rates in the past 3.lower economic growth. 4.aggresive lending by the banks in the past. 5. priority sector lending agriculture and MSMEs.

Banks lending money to other banks.

Inter Bank Participation Certificates (IBPCs) bought by banks, on a risk sharing basis, shall be eligible for classification under respective categories of priority sector, provided the underlying assets are eligible to be categorized under the respective categories of priority sector and the banks fulfill the Reserve Bank guidelines on IBPCs.

It is the Gross Bank Credit (GBC) minus the exempted deposits such as NRNR, FCNR, deposits,etc. This is the base on which the achievement of the priority sector lending rate gets calculated.

Reserve bank of India not only regulates the public sector banks in India, but also the private banks and international banks that operate inside India. Reserve Bank of India supervises/oversees the banking operations of all banks in India. They are responsible for the proper functioning of all the banks and they are also the lender to the banks (The place where banks go to borrow money if they are short of funds). They also decide the lending and deposit rates for all banks in the country.

types of commercial banks are: 1) public sector banks 2) private sector banks....

Classification of Banks in India is done into four main classes. The classes include commercial banks, savings banks, public sector banks and private sector banks.

Consortium Lending is that type of lending in which two or more banks come together to finance the big projects requiring huge amount of money. Consortium lending is usually done by banks to distribute the risks among the group of banks ,it is also used by smaller banks to use as an opportunity to be a part of the big project financing and to gain expertise in this area. Big banks by resorting to consortium lending not only saves their prospective customers but also builds good relations with other banks.

yes... all nationalised banks belongs to public sector banks...

Private sector banks is a bank that is owned by the private individual. Thats bank called private sector bank.

function of public sector in india

All the nationalised banks r public sector but all public sector banks r not nationalised

Public sector banks are banks that are owned by the government of India. The most important use of public sector banks is the fact that, it is used by the government to dispense the pension amounts for the retired employees of state and central government if India.

pvt sector banks are those banks in which majority of stake is hold by private individuals and not by the govt.

Scheduled banks and non scheduled banks . Scheduled banks comes under RBI act 1934 and some of the scheduled banks are Public sector banks , private sector banks and foreign banks ... Non scheduled banks are not included under RBI 1934 act

There are multiple major banks that offer home loan lending. A few of the national banks that are located in most states are: Bank of America, US Bank, or Wells Fargo.

Fund-based exposure is actual lending from public banks. Non-fund based exposure is credit extended by private banks with no actual lending.

Private sector banks refer to banks which have the majority of stock owned by private people. The government cannot own a controlling share in a bank designated as private sector.

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.

Private sector banks are better than public sector banks in the following aspects:They are more customer friendly and customer oriented. If they don't get customers they go out of business (Unlike public sector banks that would stay in business anyway because they are owned and run by the government)They offer more facilities than public sector banks (Because of the same reason in point a)They offer better interest rates for depositsThey offer a wider variety of products.I am not saying that public sector banks don't do all these things, just that they don't do it as aggressively or effectively as private sector banks because their existence is not dependent on customers whereas for private banks they will be bankrupt if customers refuse to bank with them.

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