Priority sector lending in india- an analysis

Nationalization of commercial banks was done by passing the ordinance mainly for providing credit facilities, advancing loans and lending money to the priority sector which plays a major role in contributing to the country’s gross development product. Nationalization generally means the central government’s undertaking of the privately owned and controlled banks. In the year 1969 fourteen banks were nationalized in order to provide a helping hand to the priority sector and to also develop the rural areas as these banks which had the major power of money concentration in the economy were basically discouraging the priority sector by paving way for urbanization and industrialization. After nationalization these sectors were benefited by as years passed by the status of priority sectors has degraded and their contributions has declined to a greater extent. The researcher in this paper portrays the Historical background of priority sector lending, impact of nationalization of commercial banks on the priority sector lending then and now and the reasons for the reduction in the overall bank credit growth of the priority sector.