ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Priority Sector Lending

It was in 1972 that a definition of the priority sector for lending was first made. Following the Narasimham Committee recommendations, there have been moves made to dilute this definition. However, the priority sector appears as nothing more than several diverse items clubbed together. This paper advocates a new approach to priority sector lending, suggesting among other things the reduction of mandatory credit to a larger number of sectors and sections, including marginal farmers, cottage industries, small trade and services and low income housing; incentives to improve credit flow to small-scale industries and food crop agriculture as well as temporary credit to assure credit to new industries and new professions by the non-poor section.

Bank Response to Capital Requirements

The increased emphasis on capital regulation has raised a number of interrelated questions. First, is focusing on capital an efficient way of regulating banks? Secondly, what is the best way to structure capital regulation? Thirdly, how do banks respond to different types of capital regulation? This paper focuses on the last two questions, examining bank responses and the costs associated with these responses to capital requirements. The discussion draws heavily on international experience and concludes with an attempt to bring to bear empirically these experiences in the Indian context.
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