Priority Sector Lending

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The Draft Technical Paper on Review of Priority Sector Lending, prepared by the Internal Working Group set up in Reserve Bank under the chairmanship of Shri C. S. Murthy, Chief General Manager-in-Charge, Rural Planning and Credit Department, was placed on the RBI website on September 30, 2005 for public opinion. Subsequently, on November 8, 2005 one subparagraph has been added under paragraph 6.10 of the Technical Paper. DRAFT TECHNICAL PAPER BY THE INTERNAL WORKING GROUP ON PRIORITY SECTOR LENDING This Draft Technical paper does not necessarily reflect the views of Reserve Bank of India SEPTEMBER 2005 RESERVE BANK OF INDIA RURAL PLANNING AND CREDIT DEPARTMENT CENTRAL OFFICE MUMBAI CONTENTS Sr. No. 1 Section 1…show more content…
In December 2004, it was decided that direct advances to priority sector will be encouraged, thus beginning a phased withdrawal of eligibility in special bonds of specified institutions. 1.3 In paragraph 90 of the Annual Policy, ibid, it was stated that “one view is that lending to any infrastructure project should be made eligible for priority sector lending while making subtargets fungible within the overall target. There is another view that enlargement of areas has resulted in loss of focus. It is also held that credit growth in housing, venture capital and infrastructure has been strong while it has been sluggish in agriculture and small industries. Further, it is argued that only sectors that impact large population, weaker sections and are employment-intensive such as agriculture, tiny and small industry should be eligible for priority sector. Since there are several issues that need to be considered in this regard, it is appropriate that these are debated and examined in depth”. 1.4 In order to examine the issues raised in the Annual Policy, it was decided that an Internal Working Group be set-up for the purpose. a) to examine the need for continuance of priority sector lending prescriptions; b) to review the existing policy on priority sector lending including the segments constituting the priority sector, targets and sub-targets, etc.; c) to examine the suggestions received regarding
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