Priority sector advances:-

1. In 1985 Krishnaswamy committee recommended to achieve the target

of priority sector lending at 40 % by 1985. Sub-targets were also
specified for lending to Agriculture and the weaker sections with in the
Priority Sector.
2. In 2007 C.S.Murthy committee has recommended new priority sector
guidelines with effect from 30th April 2007.
3. Linkage of Targets:- The Priority sector targets are now linked to 40% of
ANBC or Credit equivalent of Off sheet balance exposure which ever is
higher.
4. ANBC = Net Bank credit + investment made by banks in non – SLR
bonds held in HTM category.

TARGETS AND SUB – TARGETS FOR PRIORITY SECTOR

DOMESTIC COMMERCIAL BANKS FOREIGN

BANKS
Total priority 40% of adjusted net bank credit (ANBC) or 32% of ANBC
sector Credit eq. amount of Off-balance sheet or (CE-OBE)
(CE-OBE) which ever is
Exposure with ever is higher. higher.

Total 18% of ANBC or CE-OBE which ever is No target.

agricultural higher. Indirect lending in excess of 4.5%
advances. will not be reckoned as performance under
18% targets.
Small Advances to small enterprises sector will 10%
enterprises be reckoned in computing performance
advances under the overall priority sector target of
40%
Micro a) 40% total advances to small enterprises Same as for
enterprises sector to mfg. enterprises with in domestic
within small investment in plant/machinery up to Rs. 5 banks.
enterprises lacs and service ent. With investment in
sector. equip. up to 2 lacs.
Khadi and All advances granted to units in the KVI No target.
village sector, irrespective of their size of
industries. (KVI) operations, location and amount of original
investment in plant and machinery are
eligible for classification under priority
sector.
Export credit For domestic banks it is a “Preferred 12%
 sector” and not a part of priority sector.
Weaker section 10% of ANBC or 25% of total priority sector No target.
advances.
Diff. rate of intt. 1% of total advances outstanding as at the No target.
end of previous year. Out of that mini. 2/3 rd
of DRI should go to rural and semi-urban
areas and 40% should be for SC/ST.

Chart showing bifurcation in small enterprises advances:

Small enterprises advance.

Manufacturing enterprises service enterprises

Original investment in plant Original cost of equipments

& machinery does not exceed does not exceeds Rs. 2 crores.
Rs. 5 crores.
( 40 % of total advances to small enterprises will goes to…..)

a) Original cost of investment in plant a) original cost of investment

And machinery is up to in equipments is up to Rs. 2
Rs. 5 Lacs. Lacs.

( 20 % of total advances to small enterprises will goes to…..)

b) Original cost of investment in b) original cost of investment

Plant and machinery is over in equipments is over Rs.
Rs. 5 lac and up to Rs. 25 lacs. 2 Lacs and up to Rs.10 lacs

Categories of priority sector:

1] Direct finance to agriculture:

a) SHORT TERM LOANS:-Direct finance to farmers:- short term loans

for raising crops that is for crop loans [NEED BASED]
In addition to farmers against pledge/hypothecation of agricultural
produce (including warehouse receipts) for a period not exceeding 12
months [ Rs.10 LACS]
b) MEDIUM TERM LOANS: For machinery and equipments, land
developing etc. [NEED BASED]

2] Indirect finance to agriculture:

 a)Financing the distribution of fertilisers, pesticides, seeds etc.
[NEED BASED]
b) Loan granted for financing for distribution of inputs for the allied
activities such as cattle feed, poultry feed etc [Rs. 40 LACS]
c) Finance extended to dealers in drip irrigation, sprinkler irrigation,
agricultural machinery with a ceiling per dealer [Rs. 30 LACS]

3] Small enterprises:

For all types of small enterprises whether for manufacturing or for service
industries finance is granted [NEED BASED]

4] Retail traders:

a) Retail traders dealing in essential commodities (fair Price shops) and

consumer co-op. stores [ NEED BASED]
b) For private retail traders [Rs. 20 LACS]
5] Housing:

Construction of house irrespective of location [ Rs. 20 LACS]

For repairs of house at rural/ semi urban area [Rs. 1 LAC]
For repairs of house at urban/metro area [Rs. 2 LACS]

6] Education loans:

In India : Rs. 10 Lacs

In foreign countries : Rs. 20 lacs

7] Micro credit:

Directly or indirectly through SHG/JLG Rs. 50,000/- per borrower.

Advances to the Weaker section:

The weaker sections under priority sector shall include the following
a) Small and marginal farmers with land holding of 5 acres and less, and
landless labourers, tenant farmers and share croppers.
b) Artisans, village and cottage industries with individual credit limits up
to Rs. 50,000/-.
c) Beneficiaries of SGSY, SC/ST, DRI, SJSRY, SLRS, SHGs.
d) Loans to distressed poor to prepay their debit to informal sector,
against appropriate collateral or group securities.

Penalties for non- achievement of priority sector lending targets.

 a) For Domestic banks having shortfall in lending to priority sector target
of 40% and / or agriculture target of 18% shall be allocated amounts
for contribution to RIDF with NABARD.
b) For Foreign banks having shortfall in lending to stipulated priority
sector advances targets to contribute SEDF of SIDBI.

Collateral security norms:

A) Agriculture No margin & No collateral up to Rs. 50,000/-

B) Agri clinic & Agri No margin & No collateral up to Rs. 5 lacs.
business
c) Small enterprises (SSI) No collateral
i) Normal accounts. Up to Rs. 5 lacs.
ii) Good Track record Up to Rs. 25 lacs.
units. Up to Rs. 50 lacs.(fund based and non fund
iii) A/cs covered under based.
CGTMSE.
d) Education loan No collateral up to Rs.7.50 lacs.

Hi tech agriculture concepts:-

1. Apiculture: Rearing of honey bees.

2. Aquaculture: Shrimp farming, fish production in artificial tanks/lakes.
3. Apriculture: Cultivation of mushroom.
4. Blue revolution: Pisciculture.
5. Floriculture: Flower production.
6. Green revolution: Targeted to increase agriculture production.
7. Operation flood (White revolution): Increase milk production.
8. Olericulture: Vegetable cultivation.
9. Mulberry: Associated with sericulture.
10. Pisciculture: Rearing/breeding of fish and fish farming.
11. Rainbow revolution: Connected with flowers.
12. Sericulture: Silk production.
13. Tissues culture: Aims at multiplication and improvement of plant
varieties.
14. Vermiculture: Rearing of earth worms.
15. Yellow revolution: Associated with oil seeds and pluses.