Priority Sector Lending in India by Public and Private Sector Banks: A Comparative Analysis (original) (raw)
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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 Lending in India: A Non Parametric Analysis
NLDIMSR Innovision Journal of Management Research
Priority sectors form the foundation and base structure of an economy. Providing adequate financial aid to these important sectors can lead to the development of an economy in real terms. These sectors include Agriculture, Micro Small and Medium Enterprises, Housing, Education and other weaker sections of an economy. Reserve Bank of India, since 1968 have specified separate targets and sub-targets for priority sector lending, falling short of which funds are transferred to Rural Infrastructure Development Fund (RIDF). The present study aims to analyse trends and performance patterns of priority sector lending at all Indian levels and Punjab in particular from 2004-05 to 2017-18. Comparative analysis of public and private banks has been done in India and Punjab and the impact of the crisis period on priority sector lending is also studied sector-wise. Steady CAGRs and increasing growth rates indicate a positive environment in banks concerning lending. But lack of social intent in pri...
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.
Priority Sector Lending and its Impact on India’s Economic Growth
The Journal of Institute of Public Enterprise, 2023
Priority Sector Lending (PSL) is a crucial financial assistance programme for vulnerable sectors in developing countries, such as agriculture, MSME, housing, and education. This research paper analyses PSL data from 2012 to 2021 for Indian public and private sector banks, examining its impact on India’s economic growth. The study uses time series data from the Reserve Bank of India and World Bank Development Indicators and various statistical techniques to derive empirical results based on the ADF unit-root test, simple regression estimation, the Breusch-Godfrey Serial Correlation LM Test, the Jarque-Bera test, and Durbin-Watson for detecting the level of serial correlation and heteroscedasticity. The results show that priority sector expenditure significantly impacts the country’s GDP per capita, while inflation has a minimal impact. The findings show that loans to the priority sector increased with the country’s economic expansion during the research period, compounding at 13.71 percent. More emphasis should be placed on PSL since it can boost the country’s economic prosperity in the future. Furthermore, the Government of India should monitor and maintain the nation’s inflation rate as low as possible.
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.
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...
Lending to Priority Sector: A Scenario from Indian Scheduled Commercial Banks
2014
Over the years the scope and extent of priority sector advances has undergone changes with several new areas and sectors being brought within the purview of this sector. Priority Sector lending includes lending to those sectors that impact large sections of the population, the weaker sections and the sectors which are employment-intensive such as agriculture, and tiny and small enterprises. The categories under priority sector include agriculture, micro & small enterprises, education, housing, export credit, and others. Priority sectors have been an integral part of bank credit delivery in India. This present study highlights the role of Scheduled Commercial banks in India in lending to various sectors viz advances to Priority Sector, Sectoral Deployment of Gross bank Credit andCredit Portfolio. To project the progressing trend of the lending pattern of the banks, trend analysis, exponential growth rate, correlation and percentage analysis were used. The result shows positive stride...
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.
BANKWISE PRIORITY SECTOR LENDING IN INDIA
res publication, 2013
The present paper mainly analyses the trend of PSAs by Public, Private and Foreign Banks from 1969 to 2011. After nationalisation of the Banks directed lending to certain sectors, such as, Agriculture, SSIs and weaker section and others, collectively known as Priority Sector was emphasized. Under this Sectoral and Sub-sectoral targets have been laid down from time to time, with the aim of upliftment of these sectors and to bring about a balanced development of the country. The comparative analysis of main categories of SCBs has been carried out to find out whether the aims of the policy have been met. If not, what are the gaps and how these lacunae can be overcome.
IJFMR
This comprehensive study conducts a comparative analysis of priority sector credit to weaker sections, focusing on both public and private sector banks in India. The research delves into the historical context, policy framework, and literature reviews related to priority sector lending. The study is divided into two phases (2013-2017 and 2018-2022) and employs a robust research methodology, including compounded annual growth rate (CAGR), mean value analysis, and a test of hypothesis for mean values. The results reveal a discernible increase in advances made by both public and private sector banks to weaker sections, reflecting a commitment to inclusive growth. Public sector banks exhibit a higher CAGR during both study phases and consistently meet prescribed targets. Private sector banks show impressive growth rates, overcoming challenges in meeting targets. Hypothesis testing confirms significant differences in mean values between public and private sector banks, emphasizing their distinct approaches. Detailed bank-wise analyses for both sectors provide insights into their contributions, growth rates, and compliance with targets. The study concludes with recommendations for policymakers and regulators to refine and monitor priority sector lending policies. Collaboration and knowledge sharing initiatives are suggested for private sector banks to enhance their performance. Overall, the study underscores the importance of sustained efforts by both sectors in aligning lending practices with priority sector goals for inclusive economic growth in India.