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New Face of Bank’s Lending to the Priority Sector

Tahira Akhtar

Assistant Professor, Department of Commerce, Unity Degree College, Lucknow, U. P., INDIA.


Finance is the life blood of economic activity. This is because it provides access to all other resources required in economic activities. No business enterprises can start and continue its operation without sufficient funds at its disposal. Financial system contributes to growth and development of the economy by mobilizing saving and then efficiently allocating these savings across investment projects. The Bank is an intermediary between those having resources and those requiring resources. Sector wise distribution of bank credit provides an outstanding contribution towards economic growth and financial inclusion as well as its role in ensuring financial stability. Various efforts have been done to increase formal credit to key priority sectors. An internal working group (IWG) was set up in July 2014 by RBI to revisit the existing priority sector lending guidelines. The diversification and development of our Economy and the acceleration of the Growth process are in no small measure due to the active role the banks have played in financing economic activities in different sectors specially priority sector. Banking system is no longer confine to metropolitan cities and large town, Infact Indian banks are now spread out into the remote corners of the country, even more significant achievement is the close association of India’s banking system with India’s developmental efforts. The target set for advances to the agriculture sector raises concern from the point of view of equitable distribution of credit to productive sector of the economy. Therefore non-adherence to the agricultural lending target raises concern as till a large proportion of India’s population depends on the agricultural sector for livelihood. This paper provides an overview of the targets to priority sector lending by commercial banks in India set by RBI. The present study ensures growth with justice by taking into account all sectors of the economy.

Keywords :Banking sector, priority sector and credit.