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

Narasimhan CommitteeSubscribe to Narasimhan Committee

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.

How Well Have Public Sector Banks Done?

The efficiency of the public sector banks has declined during the 1990s when measured by the spread/working fund ratio. Though the turnover/employee ratio of the public sector banks improved, the ratio for the private and foreign banks doubled relative to that of the public sector banks. The profitability of the public sector banks did improve relative to the private and foreign banks, but they have lost ground in their ability to attract deposits at favourable interest rates, in their slow technological upgradation, and in their staffing and employment practices, which has implications for their longer-term profitability.
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