Priority sector lending: Genesis, developments and trade off with bank’s profitability
Pratibha Naruka, Dr. Manju Yadav
The importance of credit for development in priority sector hardly needs any emphasis. But recently the debates about cost –benefit analysis of the priority sector lending has drawn significant attention. Arguments about PSL being a liability on commercial banks in respect of higher NPAs, low profitability, diversion of funds, no effective end use of advances, government interference has gained ground. On basis of above certain Scholars advocate reducing the scope of PSL including the M. Narsimham to who recommended to slash PSL target to 10% of banks credit outstanding. This paper examines the ground level impact of the PSL and tries of establish link between credit surge and development in the concerned subsectors and holds low profitability of banks as just a short term phenomenon. For the purpose of the study extensive review of relevant literature and various committees has been done in order to reemphasize PSL as a cornerstone of Indian Financial inclusion framework.