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ZENITHInternational Journal of Multidisciplinary Research

Vol.1 Issue 1, May 2011, ISSN 2231-5780

www.zenithres

earch.org.in

47

PERFORMANCE REVIEW OF COMMERCIAL BANKS IN INDIA

WITH SPECIAL REFERENCE TO PRIORITY SECTOR LENDING- A STUDY OF POST REFORMS ERA

DR JASMINDEEP KAUR *; SILONY**;* Lecturer, Commerce Department, Punjabi University, Patiala

**Lecturer, Department of Commerce, Patna Womens College, Patna

__________________________________________________________________

ABSTRACT

The present paper is related to the role of public sector and private sector banks in priority sector

lending. For the purpose of study secondary data has been collected from Statistical TablesRelating to Banks in India, Report on Trend and Progress of Banking in India. The period from

1990-91 to 2007-08 has been chosen for the study. The scope of study covers the data of publicsector banks and private sector banks in India. It is found from the study that priority sector

advances and agricultural advances of both the types of banks had improved manifold over the

study period. But, they were still lacking behind to achieve the targets set for them by RBI inagriculture sector. It was observed that the performance of private sector banks in respect of all

the parameters was better than that of public sector banks. It is suggested to increase the attention

of both the public and private sector banks on the priority sector of the economy.

KEYWORDS: Public sector banks, private sector banks, priority sector, performance.

.

______________________________________________________________________________

INTRODUCTION

Banking system has a significant place in the nation. A banking institute is indispensable in a

modern society. It is comparable to heart of the economic organism pumping in the savings and

pumping out the investible funds in diverse channels. It forms the core of the financial system of

a country. Although the financial system of India is still characterized by the existence of both

the organized and unorganized segments, institutions in the organized financial system have

grown significantly and are playing an increasingly important role. The unorganized sector

comprises of the moneylenders and indigenous bankers catering to the credit needs of a large

number of persons especially in the country side. Organized financial sector has a wide mixture

which comprised of commercial banks, co-operative banks and the other institutions. Amongst

the institutions in the organized sector, commercial banks are the oldest institutions having a

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wide network of branches, commanding utmost public confidence and having the lions share in

total banking system.

Commercial bank plays a pivotal role in the economic development of a country.

Economic development involves investment in the various sectors of economy. The banks

collect saving from the people and moblise saving for investment in industrial projects. They are

simple business or commercial concerns which provide various types of services to customers in

return for payment in one form or another. They have been in existence in India for the past

several decades. Historically, they were started and developed by the industrialists/ businessmen

in the metropolitan cities and port towns. Banking was, therefore, concentrated mainly in big

cities. Within these big cities also, it was mainly the well placed traders, businessmen and theindustrialists who availed of most of the credit facilities. The small common man or the

agriculture sector did not receive loan at all. As a result of this, RBI appointed a committee on

the Direction of the All-India Rural Credit Survey in 1951. The committee recommended to

nationalize the Imperial Bank of India to become State Bank of India. Accordingly, State Bank

of India was set up on July 1, 1955. With this, a large number of branches were opened in the

unbanked areas. In 1960, eight banks which were the subsidiaries of State Bank of India were

also nationalised. This brought one-third of the banking segment under the direct control of the

Government.

Although the Indian banking system had made considerable progress in the 1950s and the

1960s, but the benefits of this did not flow down to the general public in terms of access to

credit. In fact, till 1968 commercial banks were not involved to any significant extent in

providing direct finance to agriculture. The Informal Group of Institutional Arrangement for

Agriculture Credit suggested in 1964 that commercial banks which through their rural branches

were gradually mobilizing more and more resources should deploy these resources for

development activities being undertaken in rural areas. All India Rural Credit Review Committee

also observed in its report in 1969 that the role played by commercial banks in the past for

financing agriculture was negligible. It was against this background that the scheme of social

control over banks on December 14, 1967 was introduced. Radical transformation of banks, their

organization and lending policies were the main aim of this scheme. But in many banks, people

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who had been controlling the policies of the banks in the past still continued to exercise their

influence over them in one way or the other. The study group under the chairmanship of Dr. D.R.

Gadgill on Organisational Framework for the Implementation of Social Objectives highlighted

the continued existence of credit gaps and revealed that bank advances continued to be

earmarked for the big industry and traders. Consequently, 14 major banks were nationalized on

July 19, 1969 to make the system reach out to the small man and to the remote rural areas.

Further, 6 more banks in 1980 were nationalized, which brought a large segment of the banking

business under Government ownership. The nationalization of bank was designed to make the

system reach out to the small man and the rural and semi urban area and to extend credit

coverage to sectors like agriculture, small scale industries, retail trade, self employed scheme,education etc, popularly known as the priority sector. Despite of significant and commendable

expansion of banking services in India during post nationalization period, these achievements

had extracted a heavy price in terms of qualitative deterioration of services and some

undermining of the financial strength of system. Productivity and profitability of the system were

seriously impaired. As a result of which a high powered Committee on the Financial System

(CFS) headed by Shri M. Narasimham was constituted by the Government of India in August

1991 to examine all the aspects relating to the structure, organization, function and procedures of

the financial system. The committee submitted its report in November 1991 and made wide-

ranging recommendations like reduction in liquidity ratio, phasing out of direct credit

programme, redefinition of priority sector, determination of rate of interest without the

intervention of RBI, abolition of branch licensing and ending the dual control of Finance

Ministry and Reserve Bank over the banking system.

As a result of these reforms the performance of banks in all respect improved manifold.

Banking sector underwent remarkable changes after reforms. An attempt has been made in this

paper to analyse the growth of commercial banks (public sector banks and private sector banks)

in India during the post reforms period.

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OBJECTIVES OF THE STUDY

(1) To study the contribution of public sector banks and private sector banks in financing

priority sector

(2) To examine the component wise lending and to evaluate the performance of commercial

banks with regard to Priority Sector Lending in India.

(3) To give suggestions on the basis of the study.

RESEARCH METHODOLOGY

For the purpose of study secondary data has been collected from Statistical Tables

Relating to Banks in India, Report on Trend and Progress of Banking in India for the various

years. The study concentrates on post reforms era. The period from 1990-91 to 2007-08 has been

chosen for the study. The scope of study covers the data of public sector and private sector banks

in India. Suitable statistical tools have been used in the study.

REVIEW OF LITERATURE

Sahu and Rajasekhar (2005), in their research paper, analysed the trends in credit flow to

agriculture by scheduled commercial banks during 1980-81 to 1999-2000. They observed that

the share of credit to agriculture in total bank credit for all the bank groups declined

significantly, especially after banking sector reforms in spite of many efforts. They analysed that

scheduled commercial banks provided large quantum of funds to better-off farmers and to the

activities earning high interest income only. They established the negative relationship between

agriculture credit and investment in government security, credit subsidy and proportion of credit

provided by the co-operative. They recognized that increasing lending rate reduced the credit

disbursed to agriculture by scheduled commercial banks and affected the average quality of their

loan portfolio so they suggested not to increase the interest rate to offset losses from defaults or

to meet the lending cost, but to strengthen the quality of credit delivery system and ensure

prompt repayment of loans for supporting the agriculture sector.

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Mohan (2006), in his research paper, examined the role of agricultural credit in supporting

agricultural production in India and reviewed the performance of agricultural credit in India

during the period 1950-51 to 2003-04. He found that there was rapid increase in total number of

rural branches, resulting into the growth of rural credit. The share of commercial banks in total

rural credit of the banking system increased rapidly during the study period. He found a wide

disparity in disbursement of agricultural credit by commercial banks. Southern states had higher

share of agricultural credit to net state domestic product, followed by the northern and central

regions. He observed that the proportion of NPAs for commercial banks were higher for

agriculture sector than that of non-priority sector. He revealed that although the overall flow of

institutional credit increased over the years but there existed several gaps in the system likeinadequate provision of credit to small and marginal farmers, paucity of medium and long-term

lending, and limited deposit mobilization. He recommended reviewing the agriculture policy and

adoption of package approach in different segments of agriculture and agro industry for

developing the status of agriculture sector.

Rao (2006), in his article, demonstrated the importance and progress of priority sector for

economy during the period 1994-95 to 2003-04. He highlighted in his study that priority sector

credit including farm credit of scheduled commercial banks declined during the said period

indicating the preference of banks for bigger borrowers with higher credit limits instead of large

number of small borrowers. He observed the decline in indirect credit to agriculture and small

scale industries sector but relatively better position in credit to other priority sectors during the

study period. He referred the recommendations of the Narasimham Committee 1991 and 1998 to

redefine the concept of priority sector and also referred the observations of RBI committee to

stress much on direct agriculture lending, small scale industrial lending, lending to small road

and water transport operators (owning more than five vehicles), retail trade and small business

under priority sector. In his study, he highlighted various problems of rural credit and suggested

to improve input delivery system, water management system, power supply, irrigation facilities,

market information and general rural infrastructure, educational and medical facilities, reforming

RRBs, state and central co-operatives and scheduled commercial banks for extending rural credit

in rural areas.

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Uppal (2009), in his research paper, evaluated the performance of public, private and foreign

banks in India and analysed the target achievement by them during 2006-07. He found that

priority sector advances of public and private sector banks were higher than foreign banks. He

observed that public sector banks were unable to achieve the target of priority sector, while

private sector banks have achieved the target. Private sector banks could not achieve the target

for weaker section. Foreign banks could achieve the targets for priority sector, small scale

industries sector and export sector. He further, found that NPAs of public sector banks was

highest followed by private sector banks and foreign banks. Main reason for more NPAs in

public and private sector banks was found to be more NPAs in agriculture sector. He examined

various issues related to priority sector like, low profitabilty, more NPAs, Governmentinterference, high transaction cost, etc. He also suggested various strategies to overcome these

issues.

GROWTH OF PRIORITY SECTOR IN INDIA DURING POST REFORMS

PERIOD

Both public sector banks and private sector banks play a vital role in economic

development by financing the priority sector of the economy. It is, therefore, important to

analyse the performance of scheduled commercial banks in India with respect to priority sector

lending and its various components. An attempt has been made to present here the performance

of scheduled commercial banks in India in this regard after banking sector reforms.

Table: 1

Year-wise Priority Sector Advances of Commercial Banks in India(Rs. in crore)

Year

Public Sector Banks Private Sector Banks

TPS

Advances(Rs.)

Total

Advances(Rs.)

%age Share

of PS to TotalAdvances

TPS

Advances(Rs.)

Total

Advances(Rs.)

%age Share

of PS to TotalAdvances

1990-91 42276 121678 34.74 2688 12067 22.28

1991-92 44995 135832 33.13 2819 12432 22.68

1992-93 48384 138295 34.99 3319 13165 25.21

1993-94 53197 148388 35.85 3846 15452 24.89

1994-95 61794 167063 36.99 4064 18765 21.66

1995-96 69609 204257 34.08 6283 20154 31.17

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1996-97 79131 222158 35.62 8832 27055 32.64

1997-98 91319 254916 35.82 11614 35062 33.12

1998-99 107200 295654 36.26 14155 44161 32.05

1999-00 127807 351383 36.37 18019 56877 31.68

2000-01 146546 405430 36.15 21550 82748 26.04

2001-02 171185 473951 36.12 25709 115020 22.35

2002-03 203095 529244 38.37 36705 143091 25.65

2003-04 244456 616570 39.65 48920 174107 28.10

2004-05 310093 817344 37.94 69384 226944 30.57

2005-06 409748 1075073 38.11 106586 302941 35.18

2006-07 521180 1374327 37.92 143768 390064 36.86

2007-08 608963 1702039 35.78 163223 470745 34.67

Exponential

Growth Rate

(%)

17.30 29.15

Source: Complied and calculated fromReport on Trend and Progress of Banking in India from 1990-91 to 2007-08.

Table 1 depicts that priority sector advances of private sector banks increased from Rs.

2,688 crore to Rs. 163,223 crore with the growth rate of 29.15 per cent and that of public sector

banks increased from Rs. 42,276 crore to Rs. 6,08,963 crore with the growth rate of 17.30 per

cent during 1990-91 to 2007-08. The percentage share of priority sector advances to total

advances of public sector banks also increased and remained between 33 per cent and 40 per cent

whereas that of private sector banks between 21 per cent and 38 per cent during the same period.

Table: 2

Year-wise Agricultural Advances by Commercial Banks in India(Rs. in crore)

Year


AGR Advances

(Rs.)

% age of Total

PS Advances

% age Share of

Total Advances

AGR

Advances (Rs.)

% age of

Total PS

Advances

% age Share

of Total

Advances

1990-91 16871 39.91 13.87 496 18.45 4.11

1991-92 18464 41.04 13.59 519 18.41 4.17

1992-93 19935 41.20 14.41 566 17.05 4.30

1993-94 21204 39.86 14.29 634 16.48 4.10

1994-95 23513 38.05 14.07 816 20.08 4.35

1995-96 26351 37.86 12.90 1233 19.62 6.12

1996-97 31012 39.19 13.96 1953 22.11 7.22

1997-98 34305 37.57 13.46 2746 23.64 7.83

1998-99 40078 37.39 13.56 3257 23.01 7.38

1999-00 46190 36.14 13.15 4239 23.53 7.45

2000-01 53685 36.63 13.24 5394 25.03 7.57

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2001-02 63082 36.85 13.31 8022 31.20 6.97

2002-03 73507 36.19 13.89 11873 32.35 8.30

2003-04 84435 34.54 13.69 14730 30.11 8.46

2004-05 112475 36.27 13.76 21475 30.95 9.462005-06 155220 37.88 14.44 36712 34.44 12.12

2006-07 205091 39.35 14.92 52056 36.21 13.35

2007-08 248685 40.84 14.44 57702 35.35 12.13

Exponential Growth

Rate (%)16.82 35.48

Source: Complied and calculated fromTable 1.1 andReport on Trend and Progress of Banking in India from 1990-91 to 2007-08.

Table 2 depicts that the performance of public and private sector banks regarding

agricultural advances increased manifold. The agricultural advances of private sector banks

increased drastically from Rs. 496 crore to Rs. 57,702 crore with the growth rate of 35.48 percent and those of public sector banks increased from Rs. 16,871 crore to Rs. 2,48,685 crore with

growth rate of 16.82 per cent during 1990-91 to 2007-08. The share of agricultural advances to

total priority sector advances of public sector banks fluctuated between 34 per cent and 42 per

cent, while that of private sector banks fluctuated between 16 and 37 per cent during the same

time period which signifies that total priority sector advances in greater percenatge went to non-

agriculture sector. The share of agricultural advances to total advances of public sector banks

also fluctuated between 12 and 15 per cent and that of private sector banks increased from 4.11

per cent to 13.35 per cent during the study period. This shows that private sector banks were

improving faster in this regard, but public sector banks were not paying much attention to

agriculture sector.

Table: 3

Year-wise Small Scale Industrial Advances by Commercial Banks in India(Rs. in crore)

Year


SSI Advances

(Rs)

% age of Total

PS Advances% age of Total

Advances

SSI Advances

(Rs)

% age of Total

PS Advances

% age of Total

Advances

1990-91 16756 39.63 13.77 1594 59.30 13.21

1991-92 17689 39.31 13.02 1693 60.06 13.62

1992-93 17487 36.14 12.64 2131 64.21 16.19

1993-94 21561 40.53 14.53 2378 61.83 15.39

1994-95 25843 41.82 15.47 3050 75.05 16.25

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1995-96 29482 42.35 14.43 3482 55.42 17.28

1996-97 31542 39.86 14.20 4754 53.83 17.57

1997-98 38109 41.73 14.95 5848 50.35 16.68

1998-99 42674 39.81 14.43 6451 45.57 14.61

1999-00 45788 35.83 13.03 7313 40.58 12.86

2000-01 48445 33.06 11.95 8158 37.86 9.86

2001-02 49743 29.06 10.50 8613 33.50 7.49

2002-03 52988 26.09 10.01 6857 18.68 4.79

2003-04 58311 23.85 9.46 7590 15.52 4.36

2004-05 67634 21.81 8.27 8668 12.49 3.82

2005-06 82434 20.12 7.67 10421 9.78 3.44

2006-07 104703 20.09 7.62 13063 9.09 3.35

2007-08 148651 24.41 8.63 26069 28.24 5.48

Exponential Growth

Rate (%) 12.14 14.36Source: Complied and calculated fromtable 1.1 andReport on Trend and Progress of Banking in India from 1990-91 to 2007-08.

Table 3 reveals that the performance of private sector banks in respect of small scale

industrial advances was highly impressive. Small scale industrial advances of private sector

banks increased from Rs. 1,594 crore to Rs. 26,069 crore, representing the growth rate of 14.36

per cent and those of public sector banks increased from Rs. 16,756 crore to Rs. 1,48,651 crore

with the growth rate of 12.14 per cent during the study period. The share of small scale industrial

advance to total priority sector advances of public sector banks declined from 39.63 per cent inMarch 1991 to 24.41 per cent in March 2008 and that of private sector banks also declined

substantially from 59.30 per cent to 28.24 per cent during the same time period. Further, the

share of small scale industrial advances to total advances of public sector banks declined

continuously barring few years. It declined from 13.77 per cent in March 1991 to 8.63 per cent in

March 2008. A similar situation prevailed in the case of private sector banks. It is pertinent to

note that the banks under both the sectors failed to improve their performance with regard to

small scale industrial advances which is a matter of concern for the developing country like

India.

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Table: 4

Year-wise Other Priority Sector Advances by Commercial Banks in India(Rs. in crore)

Year


OPS

Advances (Rs.)

% of Total PS

Advances

% of Total

Advances

OPS

Advances (Rs.)

% of Total PS

Advances

% of Total

Advances

1990-91 8649 20.46 7.11 598 22.25 4.96

1991-92 8842 19.65 6.51 607 21.53 4.88

1992-93 9236 19.09 6.68 622 18.74 4.72

1993-94 10432 19.61 7.03 834 21.68 5.40

1994-95 12438 20.13 7.45 1098 27.02 5.85

1995-96 13751 19.75 6.73 1568 24.96 7.78

1996-97 16548 20.91 7.45 2125 24.06 7.85

1997-98 18881 20.68 7.41 3020 26.00 8.611998-99 24448 22.81 8.27 4447 31.42 10.07

1999-00 32079 25.10 9.13 6467 35.89 11.37

2000-01 40395 27.56 9.96 7998 37.11 9.67

2001-02 53712 31.38 11.33 9074 35.30 7.89

2002-03 71448 35.18 13.50 17602 47.96 12.30

2003-04 101710 41.61 16.50 26600 54.37 15.28

2004-05 129984 41.92 15.90 39241 56.56 17.29

2005-06 163756 39.97 15.23 57777 54.21 19.07

2006-07 201023 38.57 14.63 76925 53.51 19.72

2007-08 211627 34.75 12.29 79452 48.68 16.70

ExponentialGrowth

Rate (%)23.59 38.16

Source: Complied and calculated fromTable 1.1 andReport on Trend and Progress of Banking in India from 1990-91 to 2007-08.

Table 4 reflects that other priority sector advances of private sector banks increased

impressively from Rs. 598 crore to Rs. 79,452 crore with the growth rate of 38.16 per cent and

those of public sector banks increased from Rs. 8,649 crore to Rs. 2,11,627 crore with the growth

rate of 23.59 per cent during 1990-91 to 2007-08. The share of other priority sector advances to

total priority sector advances of public sector banks increased from 20.46 per cent to 34.75 per

cent and that of private sector banks increased highly from 22.25 per cent to 48.68 per cent

during the study period. Further, the share of other priority sector advances to total advances of

public sector banks fluctuated between 6 per cent and 16 per cent and that of private sector banks

increased continuously during the study period except the years 2001 and 2002. This shows that

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private sector banks were paying increasing attention towards other priority sector than public

sector banks.

Table: 5

Year-wise Percentage Share of Priority Sector Advances under National Goals

Year


TPS advances

% of Net Bank

Credit.)

AGR advances

% of Net Bank

Credit

TPS advances

% of Net Bank

Credit.)

AGR advances

% of Net Bank

Credit

2000-01 43.7 15.7 36.7 9.6

2001-02 43.5 14.8 40.9 8.5

2002-03 41.2 14.5 44.1 12.0

2003-04 43.6 15.1 47.3 14.2

2004-05 42.8 15.3 43.6 13.5

2005-06 40.3 15.3 42.8 13.6

2006-07 39.7 15.4 42.9 12.7

2007-08 44.7 17.5 47.8 15.4

Source: Compiled fromReport on Trend and Progress of Banking in India from 2000-01 to 2007-08.

Table 5 depicts that public sector banks in India have achieved the target of 40 per cent of

net bank credit set by RBI for priority sector advances during 2000-01 and 2007-08. The share of

priority sector advances to net bank credit ranged between 39 per cent to 45 per cent and theshare of agricultural advances to net bank credit of public sector banks in India varied between

14 per cent and 18 per cent. This shows that public sector banks were not able to achieve the

target of 18 per cent of net bank credit set by RBI for agricultural advances during the study

period. Further, table displayed that private sector banks in India could achieve the target of

priority sector in all the years except 2000-01. The share of priority sector advances to net bank

credit ranged between 36 per cent to 48 per cent and share of agricultural advances to net bank

credit of private sector banks in India varied between 8 per cent and 16 per cent. Thus, both the

type of banks was able to achieve the target for priority sector but not for agriculture sector

during the period of study.

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Non-Performing Advances

NPA is defined as an advance for which interest or repayment of principal or both remain

outstanding for a period of 90 days. It affects the earning capacity and profitability of the banks.

Credit is one of the most important assets of the banks. Increasing credit means improving

financial soundness of banks but that is only if it is accompanied by the willingness of the

borrowers to pay. Indian banking system has very serious problem of mounting NPA. This

problem is more critical in case of priority sector. The position of commercial banks regarding

NPAs has been shown in Table 6.

Table: 6

Component-wise Percentage of Non-Performing Advances of Public and Private Sector Banks to Total

Priority Sector

YearPublic Sector Banks Private Sector Banks

AGR SSI OPS TPS AGR SSI OPS TPS

2000-01 13.87 19.44 12.11 45.42 5.03 15.61 7.98 28.62

2001-02 13.84 18.73 11.92 44.49 3.76 12.73 5.33 21.82

2002-03 14.60 19.24 13.39 47.23 4.52 10.63 5.45 20.60

2003-04 14.44 17.62 15.48 47.54 4.43 12.19 7.35 23.97

2004-05 15.21 16.43 17.42 49.06 5.29 10.96 8.62 24.87

2005-06 14.99 16.72 22.36 54.07 6.57 10.31 12.29 29.172006-07 16.86 15.14 27.47 59.47 9.31 6.98 14.93 31.22

2007-08 20.80 14.60 28.21 63.61 11.31 5.02 10.02 26.35

Source: Compiled from Trend and Progress of Banking in India from 2000-01 to 2007-08.

It can be seen from Table 6 that percentage of total priority sector NPAs of public sector

banks was more than that of private sector banks during 2000-01 to 2007-08. Percentage of total

priority sector NPAs of public sector banks increased from 45.42 per cent to 63.61 per cent and

that of private sector banks decreased from 28.62 per cent to 26.35 per cent during the same time

period. Agriculture NPAs of public and private sector banks increased tremendously from 13.87

per cent to 20.80 per cent and 5.03 per cent to 11.31 per cent respectively, during the study

period. Small scale industrial NPAs of public sector banks decreased from 19.44 per cent to

14.60 per cent and that of private sector banks decreased marvelously from 15.61 per cent to

5.02 per cent. Other priority sector NPAs of public sector banks increased sharply from 12.11 per

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cent to 28.21 per cent and that of private sector banks increased from 7.98 per cent to 10.02 per

cent during the same time period.

Hence, it can be concluded that during the post reforms, priority sector advances of

private sector banks grew faster than that of public sector banks. The above analysis shows that

public sector banks concentrated more on agriculture sector than other sectors of the economy, in

the initial years of the study. But after 2002-03, both public and private sector banks started

concentrating on the service sector, recognizing the need of this sector for the economic

development of the economy. Both the public and private sector banks achieved the national target

of priority sector but, not for agriculture sector during the study period. It can also be inferred that

total priority sector NPAs of public sector banks increased and that of private sector banks

decreased. This might be because of risk-aversion approach followed by the private sector banks.

Sector-wise analysis shows that in agriculture and other priority sector NPAs of public and private

sector banks increased and small scale industries sector NPAs of both the banks decreased during

the study period. Thus, it has been found that on the whole, private sector banks in India were

giving higher attention to priority sector of the economy than public sector banks during the study

period.

SUGGESTIONS

Public sector banks should speed up their performance regarding priority sector lending.

As their performance in terms of priority sector, agricultural, small scale industrial and

other priority sector advances was slower than that of private sector banks. Besides

giving impetus to other priority sector advances, banks should lay stress on agricultural

and small scale industries advances also, as their performance is deteriorating in this

regard.

Considering the importance of priority sector advances in the country like India where

agriculture is the major occupation, it is suggested that both public and private sector

banks should make committed efforts to achieve the national targets for agriculture

sector. So that the major proportion of beneficiaries may be benefited.

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The study points out that priority sector NPAs of the public sector banks in India have

shown an alarming increase and this increase is maximum in the case of agriculture

sector. The banks with the co-operation of Government should take steps to generate new

sources of income for the agriculture sector beneficiaries. Also, the recovery procedure of

the banks should be strengthened by organizing recovery camps with the co-operation of

local government, creating awareness among beneficiaries about the importance of

prompt repayment, fixing recovery targets, regular visits to the borrowers, sending

notices to them, taking strict actions against them in case of default and setting up

separate cell for recovery of priority sector loans as NPAs are highest in this sector.

Banks should be given some incentives to achieve the targets set for priority sector.Proper awareness should be given to public regarding the schemes of priority sector by

RBI.

REFERENCES

Chawla, A.S. (1987), Nationalisation and Growth of Indian Banking, Deep and DeepPublications, New Delhi, p.216.

Mohan, R. (2006), Agricultural Credit in India: Status, Issues and Future Agenda, Economicsand Political Weekly, March (18-24), Vol. XLI No.11, pp. 1013-1040.

Patel, K.V.; and Shete, N.B. (1984), PrioritySector Lending by Commercial Banks in India,Prajnan, Vol. XIII, No.1 (Jan-March), p.151.

Rao N. K. (2006), Bank Credit: Redefining Priorities, Professional Bankers, ICFAI University

Press, Hyderabad, pp. 11-14.

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