Shivangi Mundhra & Kalpesh Prashant Mhatre, Symbiosis Law School, Nagpur, Symbiosis International Deemed University, Pune
ABSTRACT
Commercial banks in India should increase their involvement in financing key sectors including agriculture, exports, and small-scale companies, as recommended by the Credit Policy for 1967-1968. However, the concept of the priority sector was legally created in 1972 when a report was issued by the Reserve Bank's May 1971-formed Informal Study Group on Statistics Relating to Advances to the Priority Sectors. Based on this assessment, the Reserve Bank released rules in February 1972 specifying the kind of things that should be included under each priority sector category in the mandated modified return for reporting priority sector advances.
Only in the circumstances of small-scale industry and operators of road and water transport were limitations on the value of initial investments mentioned; otherwise, the rules suggested only the broad description of the advances to be included and no restrictions. There have been several shifts in the breadth and depth of the priority sector since then, with many formerly unrelated fields being folded into it. This article examines the evolution, through time, of commercial banks in India's concentration on lending to key sectors. The growth of strategically important industries is also reflected in this finding, suggesting the positive effects of bank lending.
Keywords: Priority sectors, commercial banks, key sectors
