Priority Sector Lending by Commercial Banks in India: Issues & Challenges

Abstract

Despite of many initiatives taken by the RBI to channelize credit into the rural India, the system is not able to achieve its target. Therefore, priority areas are still lagged behind in the context of overall socio-economic development. To examine the role of bank in delivering priority lending, the study conducted on the 240 numbers beneficiaries of six commercial banks in rural areas of Assam, India. The results are very disappointing. The proportion of Loan distribution in three sectors of studies namely Agriculture, MSE and other sectors are not equal. High Interest on the bank loan resulted beneficiaries to fall into debt trap. 77% of respondent revealed that the banks official does not give education on the schemes and subsidy available in the priority sector loan. Loan that is received from the bank are not sufficient to meet beneficiary’s requirement and the projects are seen incomplete in most cases. The bank officials must devise mechanism to tackle all shortcomings and improve the system for smooth lending.