Tuesday, 27 August 2019

Priority Sector Lending-2 , Banking Fundamentals to Know for students.

Priority Sector Lending - 2


Under the priority sector, the weaker sections that are included are as follows:

1.Small and marginal farmers who have land holdings of 5 acres and less,

 2.landless laborers,

3. tenant farmers and sharecroppers,

4. artisans,

 5.village and cottage industries where the credit limits for individuals do not exceed Rs. 50000,

6.beneficiaries of Swarnjayanti Gram Swarozgar Yojana (SGSY),

7.Scheduled castes and schedule tribes beneficiaries of DRI scheme,

 8.beneficiaries under Swarnjayanti Shahari Rozgar Yojana (SJSRY) and

9.beneficiaries under the Scheme of Liberation and Rehabilitation Scavengers (SLRS) Advance to Self-Help Groups (SHGs).

Target -10% of ANBC (Adjusted Net Banking Credit)

RBI Guidelines on weaker sections: The overall target set by the RBI for the priority sector lending is 40% of the adjusted net bank credit (ANBC) out of which 18% is fixed for the agriculture sector and 10% for weaker sections of the society.

Differential Rate of Interest (DRI)

Introduced in 1972, this the scheme is being implemented by all-Indian Scheduled Commercial Banks.

Objective: The scheme was to provide bank finance at a concessional rate of interest of 4 percent p.a. to the weaker sections of the community for engaging in productive and gainful activities. In this way, they could improve their economic conditions.

Area of Operations: The scheme is being implemented throughout the country by all-Indian Scheduled Commercial Banks.

Target Group/Eligibility Criteria: The income ceiling for eligibility is an annual income of Rs. 7200 per family in urban or semi-urban areas and Rs. 6400 per family in rural areas. The size of landholding must not exceed one acre of irrigated land and 2.5 acres of dry land. However, this landholding criterion is not applicable to SCs/STs. The important categories of borrowers under the scheme are SCs/STs and others engaged on a small scale, in agriculture and/or allied activities, people who collect or process forest products, people physically engaged in the cottage and rural industries, etc.

The banks are required to lend under the Scheme, at least one percent of their aggregate advances as at the end of the previous year.

Two-thirds of the total DRI advances must be routed through the banks’ rural and semi-urban branches.

Loan Amount: The maximum assistance per beneficiary has been fixed at Rs. 6500 for productive purposes. In addition to this, physically handicapped persons can avail of assistance to the extent of Rs. 5000 (maximum) per beneficiary for acquiring aids, appliances, equipment, provided they are eligible for assistance under the scheme. Similarly, members of SC/STs satisfying the income criteria of the scheme can also avail of housing loan up to Rs. 5000 per beneficiary over and above the loan of Rs. 6500 available under the scheme.

Margin Money: This scheme has no margin money prescribed.

Capital Subsidy/Interest: Under this scheme no capital subsidy is available. The rate of interest to be charged on loans is 4 percent p.a.

Security: Under this scheme, no collateral security/third party guarantee is required. The assets created out of the loan amount would only be hypothecated to the banks. 
Repayment: The repayment period cannot exceed the period of five years including a grace period of two years.

Reservation/Preference: The banks are required to make sure that at least 40 percent of their DRI advances flow to SC/STs.

Agricultural Gold Loan:

Purpose:- Loan  to enable farmers to meet their short-term agricultural credit needs. An existing the account holder can avail this loan within an hour producing land tax receipt along with passbook and gold.

Eligibility: Any person engaged in agriculture or allied activities as well as persons engaged in activities permitted by RBI to be classified under agriculture

a. Cash Credit / Overdraft:  like KCC, it is a running account for a period of 3 years, subject to review at annual intervals.

b.D demand Loan / Term Loan: the repayment period of the loan should be fixed so as to coincide with the harvesting and marketing season. The total period will not generally exceed one year from the disbursement of the loan in the case of short-term loan/production credit and 36 months in other cases
Documents:  1.Proof of Identity 2.Passport size photograph 3.Address Proof 4. Proof of Agricultural land/property- Tax receipts 5.Demand Promissory Note 6. Loan agreement 7.Gold Loan pledge.

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