Banks not sure of meeting priority sector lending target

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Banks not sure of meeting priority sector lending target

With credit growth not picking up owing to a high interest rate regime, many banks are now apprehensive about meeting their priority sector lending (PSL) target in the current fiscal.

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With credit growth not picking up owing to a high interest rate regime, many banks are now apprehensive about meeting their priority sector lending (PSL) target in the current fiscal. "Meeting the priority sector lending target will be difficult in the current fiscal as the credit growth is subdued," Bank of India chairman and managing director Alok Misra has said.

He also said the bank is likely to post a 15.5-16% growth in gross advances in this fiscal against the earlier estimation of 18%. Similarly, Central Bank of India is also apprehensive about meeting the growth target in the PSL category this fiscal. "It seems little difficult at this point of time. However, we will try to meet the target," says Central Bank of India chairman and managing director MV Tanksale.

PSL is the prescribed limit of loan for banks that should be given to specific sectors like agriculture and small scale units for developmental activities. Currently, the Reserve Bank prescribes domestic banks to disburse 40% of their net bank credit to the priority sector, which is 32% for the foreign banks. As per recent data released by the RBI, on a year-on-year basis, non-food credit increased 15.4% in December compared with 27.2% in the same period previous year.

The RBI also said total credit disbursement to the agriculture and allied areas grew by only 5.6% to Rs 4.60 lakh crore in December, which was as high as 25.4% in the same period last year, indicating a sluggish growth in priority sector lending. However, some of the bankers also said though they are hopeful of meeting the target. "We have a disbursement target of around Rs 35,000 crore to priority sector this fiscal and had already provided Rs 27,000 crore as of now. We are hopeful of achieving the targeted advances," Corporation Bank executive director Ashwani Kumar said.