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1Inchara P.M. Gowda, ICSSR Post-Doctoral Fellow at Institute of Management Studies, Kuvempu University, Shankaraghatta, Karnataka, India. She can be reached at incharapmgowda@gmail.com.
Banking sector plays a crucial role in the overall development of the economy by providing a safe place for parking the surplus fund and also by channelising the fund so mobilised for different sectors of the economy. However, certain sections/sectors of the economy have not received adequate attention of bankers and in a way, they were deprived of formal financial services. Keeping these aspects in mind, the RBI has designed guidelines directing the lenders to earmark and deploy a certain portion of their loanable amount to priority sectors. After started implementing these directives, there is a view among a few stakeholder groups including the banking companies that lending to priority sector is one of the reasons for piling up of their NPAs. In this backdrop, this article makes an attempt to examine the lending by three groups of SCBs viz. PSBs, PVSBs and branches of FBs to priority and non-priority sectors, and also the extent to which these loans are causing the increase in their NPAs. For this purpose, relevant statistics are used for a period of 12 years, 2007–2008 to 2018–2019 and a few descriptive statistics, CV, CAGR, chi-square test and t-test are carried for analysis and testing the hypotheses. The study finds a significant difference between non-priority sector lending and priority sector lending from the point of view of NPAs of SCBs. The study further shows that the general perception that the priority sector lending is causing more towards mounting NPAs of SCBs is unfounded.
Scheduled commercial banks, Public sector banks, Private sector banks, Foreign banks, Nonperforming assets, Priority sector lending
JEL Classification: G21, G24, G28, G201
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