IAS Economy Practice Question . 15

Despite a fixed target stipulated by the RBI for priority sector lending in India, it has been observed that while banks often tend to meet the overall priority sector targets, they sometimes tend to miss the agriculture sub-targets of priority landing. What are possible reason/ reasons for this?
1. Low demand of loans in agriculture
2. Absence of suitable banking infrastructure
3. Difficult recovery from peasants
Choose the correct option:
[A]1 & 2
[B]2 & 3
[C]1, 2 & 3
[D]1 & 3


Answer: 2 & 3
The first statement is incorrect. The second statement correct to the extent that majority of Indian peasants don’t have access to banks. However, it is the third statement , which is the major cause.
It has been observed that while banks often tend to meet the overall priority sector targets, they sometimes tend to miss the sub-targets. This is particularly true in case of domestic banks failing to meet their sub-targets for agricultural advances. One of the reasons banks often site for not lending to this sector is that recovery is often difficult. Please note that Domestic banks having a shortfall in lending to priority sector/ agriculture are allocated amounts for contribution to the Rural Infrastructure Development Fund (RIDF) established in Nabard. In case of foreign banks operating in India, which fail to achieve the priority sector lending target or sub-targets, an amount equivalent to the shortfall is required to be deposited with Sidbi for one year.

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