Impact of Priority Sector Lending on Financial Profitability: Segment Wise Panel Data Analysis of Indian Banks (original) (raw)
Related papers
Determinants of Priority Sector Lending of Indian Public Sector Banks: An Econometric Analysis
International Journal of Research -GRANTHAALAYAH
Compulsory sanctioning credit or priority sector lending (PSL) is part of the regulatory framework for commercial banks/ financial institutions in many countries, both developing and developed. However, compliance and lending effectiveness of such programs may be determined by a number of factors. This may be particularly so in developing countries, where availability of finance for the vulnerable sectors likes agriculture, small businesses, weaker sections, are scarce. The present paper aims at examining the patterns of priority sector lending by banks, with a view to identifying the factors which determine this lending The paper is based on an analysis of secondary data relating to priority sector lending (2006-07-2015-16) for the Public sector banks in India. The results indicate gaps in patterns of the sect oral target compliance by different bank groups, along with the lending preferences and challenges faced by banks in such lending. It also identifies bank-specific characteri...
A Comparative Study of Commercial Banks Lending to Priority Sector in India (2013-2022
IJRTI, 2023
Within the banking system, the role of public and private sector banks has taken on a new significance in light of changing economic conditions in India. The priority sector, in which includes areas such as agriculture, small scale industries, and other priority sector. The priority sector yet to be and will continue to be an important area of focus for all banks over the next decade due to tough socioeconomic realities faced by Indian banks. The objective of this research paper is to analyze lending levels and structure within the priority sector over the past ten years. The entire study of this paper is based upon secondary data, collected from the various relevant issues published by RBI and from other reliable sources of 12 public sector banks and 21 private sector banks. The entire study is stretched over the period 2013 to 2022, with a view to analyze the growth of various components of priority sector lending with the help of compound annual rate of growth. The behavior of inter-year disparities in priority sector lending is explained with the help of percentage, coefficient of variation and the performance of these two banks group in priority sector lending has been computed with the help of ttest. The study highlighted that, although, on an average, the prescribed target of priority sector lending has not been achieved in many years, but, one important issue of concern is that the shrinking share of priority sector credit in net bank credit over a period of time by both banks group, which required immediate attention of the policy makers. The public and private sector banks could not deploy 18.00 per cent of net bank credit in agriculture sector and thus, they are failed to achieve the stipulated target of agricultural lending.
PRIORITY SECTOR LENDINGS BY COMMERCIAL BANKS IN INDIA
After independence it was felt that in order to achieve overall development of the country it is essential to develop the large rural sector, for which it is necessary to channelise required financial resources. An enunciation of the need to channelise the flow of credit to certain sectors of the economy, known as the priority sectors, in the largest interest of the country, can be traced to the Reserve Bank"s credit policy for the year 1967-1968. The government initiated measures for social control over banks in 1967-1968 with a view to securing a better adaptation of the banking system to the needs of economic planning and it is playing a more active role in aiding sectors like agriculture and small industries. The present study is an attempt to study the priority sector advances by the public, private sector and foreign bank groups. All the parameters have been analyzed for the period 1997-1998 to 2008-2009. The study concludes that public and private sector banks have achieved the overall target of 40 per cent. On the other hand, foreign banks have achieved the small scale industries, export credit and overall target.
Priority Sector Lending by Commercial Banks in India: An Evaluative Study
The priority sector lending is mainly intended to ensure that the assistance from the banking system to those sectors of the economy which has not received adequate support of institutional finance. The attainment of the socio economic priorities of the government like growth of agriculture, promotion of small entrepreneurs and development of backward area etc is the major responsibility of commercial banks. Since seventies, Reserve Bank of India and government of India have stipulated guidelines for priority sector lending by banks. The same was revised on April 30, 2007 and overall priority sector lending target was fixed at 40 per cent for domestic banks and 32 per cent for foreign banks. However, the banks are not able to reach the prescribed target of lending to priority sector. The small entrepreneurs and farmers are continued to be both credit and demand constraints. Thus, it can be observed that the demand for funds for priority sector viz., small entrepreneurs and agricultural sector is enormous. With this backdrop, the present treatise is an attempt to diagnose the various lacunas of priority sector lending by commercial banks in the area under consideration in the context of national scenario.
Dogo Rangsang Research Journal , 2020
Indian banking sector is an important constituent of the Indian financial system. Banking in India has a very old origin. It started in the Vedic period where literature shows the giving of loans to others on interest. India has over the last decades experienced different degree of responsive policies in the banking sector. The banking sector plays a vital role through promoting business in urban as well as in rural areas in recent years. It helps to develop economy of the country. It is always said that rural development cannot be possible without supplying adequate credit to the priority sector in general and agricultural in particular in time. Hence, this researches paper especially emphasis on priority sector lending in the Ahmednagar district.
Scheduled Commercial Banks (SCBs) were advised to grant at least 40% of their loans (measured in terms of Adjusted Net Bank Credit or ANBC) to borrowers in the priority sectors in order to provide institutional credit to those sectors and segments for whom it is difficult to get credit. Thus Priority Sector Advances constitutes very large proportion of the Total Advances in Banks Balance Sheet. The present study is a an attempt to analyze the Impact of Priority Sector Advances on Banks Profitability. All the scheduled commercial banks operating in India were considered for the analysis. Ratios of Priority
Aim of the article: The main purpose of this article was to investigate the impact of the determinants of profitability on the commercial banks in Asian countries. An Asian country like Bangladesh and India was selected as the research field. The present study also pursues to examine the impact of specific factors and macroeconomic factors on the profitability in the Bangladeshi and Indian private commercial banking sectors. Methods applied and analysis tools: The data were retrieved from the Annual Reports of Indian and Bangladeshi private commercial banks covering the period of-. As sample, private commercial banks were considered randomly, of which were from India and were from Bangladesh. The panel data research methodology was used as an estimation technique to analyze the data. Also, the ordinary least squares (OLS) regression model was used to scrutinize data. To check whether the models were appropriate, the Breusch-Pagan Lagrange Multiplier (LM) Test was employed. Banks' specific factors and microeconomic factors showed almost the same variations for both Bangladesh's and India's private banks. All models and tests were evaluated using E-views econometric software. The major findings: The present study finds that the Return on Asset (ROA) from the banks' specific variables, strength of the Bank size (BS), and Debt to Asset Ratio (DAR) are found to be positive and significant. For banks, the Deposit to Asset Ratio (DTAR) and the Loan to Deposit Ratio (LDR) are found to be negative and significant. The Equity to Asset Ratio (EAR) and Debt to Equity Ratio (DER) do not have any positive/negative impact. Contribution, originality, and implications: As macroeconomic variables, the inflation rate (IR) and the GDP growth rate (GDPGR) are measured and found to be positive and significant for ROA. As macroeconomic variables, the Inflation Rate (IR) and the GDP Growth Rate (GDPGR) are found to be positive and significant in the case of ROA. The concerned authorities responsible for regulating the financial performance of the banking sector can use the results of this study to take various fruitful decisions on bank profitability.
Priority sector lending: Comparative performance of public and private Banks in India
International Journal of Financial Management and Economics
This study examines the comparative performance of priority sector lending (PSL) between public and private banks in India. PSL is a critical aspect of banking regulation in India, aimed at ensuring equitable access to credit for sectors deemed crucial for socioeconomic development. Public and private banks play distinct roles in fulfilling PSL targets, with public banks traditionally shouldering a larger share of PSL obligations. However, recent trends suggest a shifting dynamic, with private banks increasingly contributing to PSL mandates. This study analyzes the factors driving this shift, including regulatory frameworks, market competition, and strategic priorities of public and private banks. By examining the comparative dynamics of PSL between these banking sectors, this study provides valuable insights into the evolving landscape of banking regulation and its implications for inclusive growth in India. The comparison analysis also demonstrates that public banks give larger average loan amounts across sectors, whereas private banks have higher growth rates, indicating a dynamic role in meeting changing market demands.
Pupose- The paper aims at analyzing the impact of priority sector advances of scheduled commercial banks operating in India on their profitability. Design/methodology/approach- All the scheduled commercial banks operating in India were considered for the analysis. Data pertaining to bank profitability were taken from Reserve Bank of India website. Ratios of Priority sector advances to total advances (PSATA) of all commercial banks during the study period taken as an independent variables whereas, Return on Assets (ROA), Return on Investment (ROI), Return on Equity (ROE), Ratio of Operating Profit to Total Assets, (OPTA), and Ratio of Interest Income to Total Assets (INTTA) were taken as dependent variables. Linear regression models were used to examine the relationship between independent and dependent variables. The study covers the period ranging from 2005 to 2014. Findings- The study reveals that there exists a statistically significant relationship between PSATA and ROI, ROA, OPTA, INTTA. On the other hand ROE was found not to be statistically significant. Implications- The results thus imply that priority sector advances have bearing on bank profitability. Keywords : Priority sector advances, profitability, PSATA, ROI, ROE, INTTA, OPTA
Reserve Bank of India has fixed some targets and sub targets for all commercial banks for PSL (Priority Sector Lending). Priority sector lending refers to that sector of economy which is not getting adequate financial assistance from different financial institutions. Due to Priority sector Lending, Non-performing assets of the banks are increasing day by day. This research paper is an attempt to measure the two way effect of every sector of PSL on NPA for public and private banks. Effect between PSL and NPA is found with the help of E Views Software. The period of study is 2001 to 2013. For the analysis Pooled Regression Model, Panel Regression Model and Two Way Fixed Effect Model is used.