| Consider the following statement pertaining to priority sector lending: |
| 1. Priority sector advances constitute 40% of aggregate credit. |
| 2. Major share of priority sector lending goes agricultural sector. |
| 3. Foreign banks having office in India need not comply with priority sector lending norms. |
| Select the correct answer using the codes given below: |
A) 1 and 2 only
B) 2 only
C) 3 only
D) 1 and 3 only
Correct Answer: A
Solution :
[a] Priority Sector refers to those sectors of the economy which may not get timely and adequate credit in the absence of this special dispensation. Priority Sector Lending is an important role given by the Reserve Bank of India (RBI) to the banks for providing a specified portion of the bank lending to few specific sectors like agriculture and allied activities, micro and small enterprises, poor people for housing, students for education and other low income groups and weaker sections.. This is essentially meant for an all-round development of the economy as opposed to focusing only on the financial sector. As of March 2015, the domestic banks and foreign banks with 20 and more branches have to disburse 40% of the Net Bank Credit (NBC) to Total Priority sector, out of which 18% should be total agricultural advances. The Foreign banks have been given a target of 32% of the Net Bank Credit to priority sector, however, there is no lower limit fixed for agriculture.
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