Page 32 - Banking Finance October 2022

ARTICLE

NEW WAY TO

INCREASE LENDING

TO PRIORITY SECTOR

THROUGH CO-

LENDING MODEL

ndian banks / Financial Institutions have sufficient basic needs of a common man and Productive sectors of the
funds for lending at lower interest rates, but meagre economy which contributes more to GDP of a nation.
outreach through it's branch network hamper their
I ability to extend credit to the unserved and under- In the National Credit council meeting held in July 1968, it
served segments of population. Most of the un-served was emphasized that commercial banks should increase
and under-served population are engaged in sectors which their involvement in financing Priority Sectors. Accordingly,
were neglected by Banks / FIs. These sectors were identified the description of Priority Sectors was formalized in the year
by Government and termed as 'Priority Sector' which have 1972 as per Informal study group on statistics relating to
national importance and have been given priority for Priority Sector Advances constituted by RBI in May 1971.
development. Although initially there was no specific target fixed in respect
of Priority Sector lending, in November 1974 banks were
Priority sector refers to those sectors of economy which may advised to raise the share to Priority Sector in their
not receive timely and adequate credit in the absence of aggregate advances to the level of 33.33% by March 1979.
this special dispensation. Further, these sectors impact large
sections of the population in general and weaker sections Subsequently, on the basis of the recommendations of the
in particular, they are employment intensive, meets the Working Group on the Modalities of Implementation of
Priority Sector Lending and the Twenty Point Economic
Programme by Banks, all commercial banks were advised
About the author
to achieve the target of Priority Sector lending at 40% of
D. Surendranath aggregate bank advances by 1985. Now, presently, the
Chief Manager & Faculty computation of Priority Sector targets/sub-targets
Union Bank of India Staff College, achievement will be based on the ANBC or Credit Equivalent
Kalkere, Bangalore
Amount of Off-Balance Sheet Exposures, whichever is higher

32 | 2022 | OCTOBER | BANKING FINANCE