Lok Sabha Question No. 3742 (UNSTARRED), answered on 2017-03-24
Subject: Priority Sector Loan
Ministry: FINANCE
Asked by: RAMCHARAN BOHARA

## Government of India Department of Financial Services Ministry of Finance

## LOK SABHA UNSTARRED QUESTION NO. 3742

TO BE ANSWERED ON THE 24 th  March 2017, Chaitra 3, 1938-39 (SAKA)

## Priority Sector Loan

## QUESTION 3742. SHRI RAM CHARAN BOHRA

Will the Minister of FINANCE be pleased to state:

- (a)  whether some other service sectors have been identified for inclusion in priority sector in order to provide loans by the banks in the country and if so, the details thereof;
- (b)  the targets set and achievements made by the banks in regard to priority sector loans during the last three years and the current year;
- (c)  whether the Government proposes to increase the existing percentage of loan given to priority sector;
- (d)   if so, the details thereof; and
- (e)   the steps taken/proposed to be taken by the Government in this regard?

## ANSWER (MINISTER OF STATE IN THE MINISTRY OF FINANCE) (SHRI SANTOSH KUMAR GANGWAR)

(a):  As  per  guidelines  issued  by  Reserve  Bank  of  India  (RBI)  on  Priority  Sector Lending,  a  target  of  40  per  cent  of  Adjusted  Net  Bank  Credit  (ANBC)  or  Credit Equivalent of Off Balance-sheet Exposure (CEOBE), whichever is higher, has been prescribed to all Scheduled Commercial Banks (excluding Regional Rural Banks).

Lending to Micro, Small and Medium Enterprises (MSME) sector has been included under Priority Sector Lending.

Bank loans to Micro, Small and Medium Enterprises for service sectors are eligible to be classified under Priority Sector Lending as per following norms.

## Service Enterprise

Bank loans up to ₹ 5 crore per unit to Micro and Small Enterprises and ₹ 10 crore to Medium Enterprises  engaged  in  providing  or  rendering  of  services  and  defined  in terms of investment in equipment under MSMED Act, 2006.

- (b):  The  targets  and  sub-targets  set  under  priority  sector  lending  for  all  scheduled commercial banks operating in India are furnished below.

| Categories                                                                                                                                                                                                                                                                                  | Domestic scheduled commercial banks and Foreign banks with 20 branches and above         | Foreign banks with less than 20 branches   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------|--------------------------------------------|
| whichever is higher. Foreign banks with 20 branches and above have to achieve the Total Priority Sector Target within a maximum period of five years starting from April 1, 2013 and ending on March 31, 2018 as per the action plans submitted by them and approved by RBI.                | 40 percent of ANBC/CEOBE, whichever is higher; to be achieved in a phased manner by 2020 | Total Priority Sector                      |
| 18 percent                                                                                                                                                                                                                                                                                  |                                                                                          |                                            |
| Agriculture Foreign banks with                                                                                                                                                                                                                                                              | and Not applicable                                                                       | 20 branches                                |
| 7.5 percent of ANBC/CEOBE, whichever is higher to be achieved in a phased manner i.e. 7 per cent by March 2016 and 7.5 per cent by March 2017. The sub-target for Micro Enterprises for foreign banks with 20 branches and above would be made applicable post 2018 after a review in 2017. | Not Applicable                                                                           | Micro Enterprises                          |

| Advances to Weaker Sections   | 10 percent of ANBC/CEOBE, whichever is higher Foreign banks with 20 branches and above have to achieve the Weaker Sections Target within a maximum period of five years starting from April 1, 2013 and ending on March 31, 2018 as per the action plans submitted by them and approved by RBI.   | Not Applicable   |
|-------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------|

The achievement of Scheduled Commercial Banks in respect of their PSL targets and sub-targets for the past three years is given at Annexure .

(c)  to  (e):  The  objective  of  priority  sector  lending  (PSL)  has  been  to  ensure  that vulnerable  sections  of  society  get  access  to  credit  and  there  is  adequate  flow  of resources to those segments of the economy which have higher employment potential and help in making an impact on poverty alleviation. Thus, the sectors that impact large  sections  of  the  population,  the  weaker  sections  and  the  sectors  which  are employment-intensive such as agriculture and micro and small enterprises are part of the priority sector.

Consequent to the Indian economy undergoing a structural transformation and getting increasingly integrated into the global economy, the national priorities have changed over the last four decades, as India has moved up to middle income level status. The emphasis  now,  over  and  above  lending  to  vulnerable  sections,  is  to  increase employability, create basic infrastructure and  improve  competitiveness  of the economy, thus creating more jobs. Therefore, to ensure adequate allocation of credit to emerging priority sectors, an Internal Working Group (IWG) was set up in July 2014 to revisit the existing priority sector lending guidelines. The recommendations of the IWG  were  examined  in  the  light  of  the  comments  /  suggestions  received  from Government  of  India,  banks,  and  other  stakeholders  and  revised  guidelines  were issued vide FIDD Circular dated April 23, 2015.

As per Existing Guidelines the categories under Priority Sector includes:

-  Agriculture
-  Micro, Small and Medium Enterprises
-  Export Credit
-  Education
-  Housing
-  Social Infrastructure
-  Renewable Energy
-  Others.
- All Commercial Banks (excluding Regional Rural Banks)

(Amount in Rs.crore)

| As on March 31st of the FY   | ANBC       | Priority Sector Lending   | Priority Sector Lending   | Agriculture Advances   | Agriculture Advances   | S&MF   | S&MF      | Micro Enterprises   | Micro Enterprises   | Weaker Sections Advances   | Weaker Sections Advances   |
|------------------------------|------------|---------------------------|---------------------------|------------------------|------------------------|--------|-----------|---------------------|---------------------|----------------------------|----------------------------|
|                              | AMT        |                           | %of ANBC                  | AMT                    | %of ANBC               | AMT    | %of ANBC  | AMT                 | %of ANBC            | AMT                        | %of ANBC                   |
| 2014 5420700.76              | 2174152.06 | 40.11                     | 833930.19                 | 15.38                  |                        | NA NA  | NA        | NA                  | 494048.17           |                            | 9.11                       |
| 2015 6198288.87              | 2378563.91 | 38.37                     | 938032.77                 | 15.13                  | NA                     | NA     | NA        | NA                  | 561594.20           | 9.06                       |                            |
| 2016 6838531.42              | 2743399.73 | 40.12                     | 1166080.17                | 17.05                  | 483911.27              | 7.08   | 438049.20 | 6.41                | 682571.44           |                            | 9.98                       |

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