Priority Sector Lending

Priority Sector Lending

The Priority Sector encompasses the Agriculture Sector, Small & Marginal Farmers, Micro Enterprises, and Weaker Sections. According to RBI guidelines, commercial banks are required to allocate 40% of their credit to priority sectors. While Priority Sector Lending plays a crucial role in India's economic development, the mandated lending system for commercial banks is a significant factor contributing to Non-Performing Assets (NPAs) in the banking industry. The agriculture sector in India has experienced an average annual growth rate of 4.6% over the past six years, as per the Economic Survey 2022-23. Public Sector Banks (PSBs) have played a key role in this growth by providing financial support to the sector.

The Indian government periodically initiates different programs to support farmers. One of the programs launched in 2020 is the Atmanirbhar Bharat Scheme. Initiatives such as the Agriculture Infrastructure Fund (AIF), Animal Husbandry Infrastructure Development Fund (AHIDF), and Pradhan Mantri Formalisation of Micro Food Processing Enterprises Scheme (PMFME) have facilitated banks in directing and financing activities related to farm credit, pre-harvest, and post-harvest management. These schemes fall under the agriculture and priority sector, contributing to banks meeting their Priority Sector targets effectively.


Agriculture Infrastructure Fund (AIF)


Agriculture Infrastructure Fund (AIF)

The government is prioritizing investment in infrastructure facilities via the Agriculture Infrastructure Fund to guarantee farmers' returns through price support, encourage crop diversification, and enhance market infrastructure. This includes post-harvest management initiatives such as supply chain services, e-marketing platforms, warehouses, cold storage, logistic facilities, and more. As of the conclusion of the financial year 2023-24, a total of 62,625 projects with a combined sanction of Rs 31,270 Cr have been funded through PSBs under this program.


Kisan Credit Card Scheme (KCC):


Kisan Credit Card Scheme (KCC)

The KCC-Saturation drive was initiated by the Government of India (GOI) on 1st February, 2020 to ensure that all farmers have access to the KCC facility. This scheme provides short-term credit limits for crop and term loans. Additionally, farmers with KCC Credit are eligible for personal accidental insurance coverage of up to Rs 50,000 for permanent disability and death, and up to Rs 25,000 for other risks. Furthermore, under this initiative, farmers can obtain collateral free loans of up to Rs 1 lakh.


Deendayal Antyodaya Yojana – National Rural Livelihood Mission (DAY - NRLM)


Deendayal Antyodaya Yojana – National Rural Livelihood Mission (DAY - NRLM)

The goal is to decrease poverty and increase the resilience of impoverished urban households by empowering them to secure profitable self-employment and skilled wage job prospects, leading to a significant enhancement in their quality of life in a sustainable manner, by establishing robust grassroots organizations for the underprivileged. The initiative focuses on offering housing with necessary amenities to homeless individuals in urban areas gradually. Furthermore, it also tackles the livelihood issues of street vendors in urban settings by assisting them in obtaining appropriate locations, institutional financing, social protection, and training to capitalize on evolving market prospects.


Stand-Up India scheme

Stand-Up India scheme

The main goal of the Stand-Up India Scheme is to enable bank loans ranging from Rs 10 lakh to 1 crore for a minimum of one Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and at least one borrower per bank branch to establish a new business. This business could be in manufacturing, services, agri-allied activities, or the trading sector. In the case of non-individual enterprises, it is required that at least 51% of the shareholding and controlling stake be owned by either an SC/ST individual or a woman entrepreneur.


Banks Heralding Accelerated Rural & Agriculture Transformation (BHARAT)


Banks Heralding Accelerated Rural & Agriculture Transformation (BHARAT)

The Government launched the 'BHARAT’ campaign under the Agriculture Infrastructure Fund Scheme to promote rural and agriculture transformation. The campaign aimed to encourage Banks and lending institutions to expedite agriculture infrastructure projects loan. Top performing Banks were recognized at the end of the campaign.

Other programs are also contributing to the increase in Priority sector advances, including the Animal Husbandry Infrastructure Development Fund Scheme (AHIDF), PM Formalisation of Micro Food Processing Enterprises (PMFME), Pradhan Mantri Kisan Urja Suraksha Evem Utthan Mahabhiyan Scheme (PM Kusum), Pradhan Mantri Matsya Sampada Yojana Scheme (PMMSY), Lakhpati Didi programme, and PMSVANidhi Scheme.


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Disclaimer

The content or analysis presented in the Blog is exclusively intended for educational purposes. It is important to note that this should not be considered as a suggestion for investing in stocks or as legal or medical advice. It is highly recommended to seek guidance from an expert before making any decision.


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