Chapter – 9 Priority Sector Advances : Origin
• Organized financial sector had very little share in the total rural credit despite government’s repeated emphasis on lending to needy sectors of the economy.
• During the meeting of National Credit Council (established by RBI) held in July 1968 emphasis was laid on role of commercial banks in increasing their involvement in the financing of priority sectors, viz., agriculture and small scale industries (till then not clearly defined).
• Priority sector was later formalized in 1972 (based on the report of the Informal Study Group on Statistics relating to advances to the Priority Sectors constituted by the Reserve Bank in May 1971.
• Based on the report, the Reserve Bank prescribed a modified return for reporting priority sector advances and certain guidelines were issued in this connection indicating the scope of the items to be included under the various categories of priority sector.
• No specific target was fixed in respect of priority sector lending till 1974.
• First time in November 1974, the banks were advised at target of 33.33 percent to be achieved by March 1979.
• In order to boost the rural economy whose share in the economy was over 70 per cent at that point of time, government introduced certain scheme (s) to improve flow of credit to these sectors. One of them was Lead Bank Scheme.
• Loans to individuals for educational purposes including vocational courses up to Rupees 10 lakh for studies in India and Rupees 20 lakh for studies abroad are included in priority sector advances.