DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : P. Samba Murthy,
Designation : Head of Department

Branch : D.C.C.P.
Institute : S.R.R.S. Govt. Polytechnic,
Sircilla, Karimnagar District
Year/Semester : V Semester
Subject : Banking – I
Subject Code : CCP- 504(B)
Topic : Indian Banking Industry – Growth
Duration : 50 Minutes
Sub-Topic : Achievements of Goals of
Nationalization in respect of
Lending
Teaching Aids : PPT CCP504(B).24 1
Objectives

On completion of this period, you would be able to

 Understand the achievements of goals of
nationalization of banks in respect of Lending.

CCP504(B).24 2
Recap

So far we have discussed :

 With regard to the post-nationalization of banks in
respect of expansion of banks.
 Coverage of rural areas and reduction of regional
imbalances as well as expansion of banks.
 Deposit Mobilization during Pre-Nationalization
Period.
 Deposit Mobilization during Post- Nationalization
Period.
CCP504(B).24 3
Deployment of Bank Credit :

 Banking has an important link among the various

economic activities.
 It plays a direct role in creating the machinery
needed for financing developmental activities.
 It also ensures that the finance is directed into
socially desirable channels.

CCP504(B).24 4
Deployment of Bank Credit (contd..

 Credit is the pillar of development.

 Bank credit has its crucial importance in the
context of development and growth with social
justice.
 It is an important input variable in the production
functions of agricultural, industrial, commercial and
allied productive activities.

CCP504(B).24 5
Deployment of Bank Credit (contd..)

 During the post-nationalization period, there has

been a growing functional diversification of credit
from the traditional to priority sectors and
procurement of food grains.
 The banking sector has been entrusted with the
responsibility of helping the government in
fulfillment of certain social goals like..
 ..productive employment, growth with equity,
alleviation of poverty etc.
CCP504(B).24 6
Deployment of Bank Credit (contd..)

 The following major guidelines for the deployment

of bank credit in India.
 Banks should provide finance to the priority sector
on an increase scale so as to bring its share to 40
per cent of the total bank credit by 1985.
 In rural and semi-urban centers, bank credit
should be 60 per cent of the deposits mobilized.

CCP504(B).24 7
Deployment of Bank Credit (contd..)

 Bank advances to agriculture and to units under the

differential interest rates scheme should be 16 per
cent of the total bank credit.
 There should be a growing rate of deployment of
credit towards the development of backward
regions.
 The banks should provide a large amount of
resources for financing the public sector plans.

CCP504(B).24 8
Credit Deployment to priority sectors

 Diversification of a large part of bank credit from

the traditional to the “priority sector” has been a
remarkable feature of credit deployment in the
post-nationalization.
 At present, the following categories of advances
are included under priority sectors .

CCP504(B).24 9
Credit Deployment to priority sectors
(contd..)

 Agriculture – both direct and indirect finance;

 Small scale industries;
 Small road and water transport operations;
 Small business and retail trade;

CCP504(B).24 10
Credit Deployment to priority sectors
(contd..)

 Professional and self-employed persons;

 Setting up of industrial estates;
 Education;
 Indirect finance to other priority sectors – loans to
scheduled Castes and scheduled tribes,
corporations, organizations;

CCP504(B).24 11
Credit Deployment to priority sectors
(contd..)

Further, financing /advancing to the other sectors like:

 Bank credit for small scale industries
 Agricultural finance
 Housing finance
 Social banking
 Credit to weaker sections
 Differential Rate of interest scheme

CCP504(B).24 12
Summary
 The scheduled commercial banks, especially the
public sector banks, are required…
 …to play a dynamic and strategic role in achieving
the plan objectives by providing institutional credit
and
 extend the support to various programmes of
development in the priority sectors for enhancing
productivity, employment and growth with social
justice.

CCP504(B).24 13
Frequently Asked Questions

 Discuss the role of commercial banks in financing

priority sectors.

 Explain the role of commercial banks in rural credit.

 Explain the contribution of commercial banks in

financing small scale industries.

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