1. BANK FINANCE TO PRIORITY SECTORS IN TIRUNELVELI DISTRICT,
TAMIL NADU
Dr.C. PARAMASIVAN 1 & P. MARI SELVAM 2
ABSTRACT
The concept of Priority Sector Lending is mainly intended to ensure that
assistance from banking system should flows in an increasing manner to those sectors of
the economy which though accounting for a significant proportion of the national product
have not received adequate support of institutional finance in the past. Priority sectors
particularly agricultural sector till facing the problems of timely finance to extent their
activities. In this regards, how the commercial banks provides financial assistance to
priority sectors over a periods, recovery performance under priority sector lending,
problems of the bankers in the priority sector lending are the major problems to be
analyzed in a timely manner. Hence this study focused on the commercial banks and its
financial performance relating to priority sector during a particular study period.
-----------------------------------------------------------------------------------------------------------Key
words:
Priority
Sector
Lending,
institutional
finance,
Economic
development
Introduction
The Economic development of any country depends upon the existence of
a well organized financial system. It is financial system which supplies the
necessary financial inputs for the production of goods and services which in turn
promote the well being and standard of living of the people of a country. Thus
the “financial system” is a broader term which brings under its fold the financial
markets and the financial institutions which support the system. An efficient
functioning of the financial system facilities the free flow of funds to more
productive activities and thus promotes investments. Thus, the financial system
provides the intermediation between savers and investors and promotes faster
economic development. In this regards, this paper is an attempt to discuss the
role of banking finance to priority sector in Tirunelveli District of Tamilnadu
during the year 2010-11.
Profile of Tirunelveli District
The Tirunelveli District was formed in 1790 by the East India Company,
later came under the direct control of the British Crown Queen Victoria. The

2. name Tirunelveli has been composed from the three Tamil words i.e. “ThiruNel-Veli” meaning “Sacred Paddy Hedge”. This District is located in the
southern part of Tamilnadu and surrounded by Virudhunagar District on the
North, Tutticorin District on the East, kanyakumari District on the South and
Western Ghats on the West Tirunelveli has its own individuality from rice to
culture. Agriculture plays a vital role in the District’s economy.
The total
cropped area was 193905 hectares, which worked out 28.91% of the total
Geographical area.
Tirunelveli District is industrially backward. There are 25 medium and
major industries such as Cement, Cotton yarn, Calcium Carbide, Sugar, Cotton
seed oil, Printing papers and flour mills etc., In addition to this there are about
14389 Small scale industries registered in this district.
Priority sector Lending
The concept of priority sector was evolved in the late sixties in order to
focus attention on the need to ensure adequate credit facilities to certain
neglected sectors of the economy particularly in the rural areas.
The
involvement of banks in priority sector lending has grown considerably with
special emphasis on opening branches in un-banked areas. The broad categories
of priority sector for all scheduled commercial banks are as under:
(i) Agriculture (Direct and Indirect finance):
(ii) Small Scale Industries (Direct and Indirect Finance):
(iii) Small Business / Service Enterprises
(iv) Micro Credit :
(v) Education loans:
(vi) Housing loans:
Table No.1 Bank Finance to Overall Priority sector Lending
S.No
Priority Sector
Amount
% to total
1
Agriculture sector
18798780
52.43
2
Micro and Small Enterprises sector
6846837
19.05
3
Retail trade sector
1730854
4.83
4
Micro finance to SHC/JLG/NB
2147555.99
5.99
5
Education sector
2206955
6.17

3. 6
Housing sector
Total
4129414
11.53
35860395.99
100
Source: Lead Bank Annual Report 2010-11
Banks are responsible to grant financial assistance to socio economic
activities which needs to accomplish the sustainable development of the country.
Priority sector lending is one of the emerging concepts which help to convene the
financial needs of the sectors. In this regards, agricultural sectors amounted to
Rs. 18798780 (52.43%) financial assistance from the banking institutions in the
year 2010 in Tirunelveli district followed by Micro and Small Enterprises sector
(19.05 %), Housing sector (11.53%), Education sector (6.17%), Micro finance to
SHC/JLG/NB(5.99 %) and Retail trade sector(4.83%). it is observed that ,banks
were provided satisfactory amount to priority sectors in the year 2010 in
Tirunelveli district
Bank Finance to Agriculture Sector
Direct finance to agriculture shall include short, medium and long term
loans given for agriculture and allied activities directly to individual farmers,
Self-Help Groups (SHGs) or Joint Liability Groups (JLGs) of individual farmers
without limit and to others (such as corporate, partnership firms and institutions)
up to Rs. 20 lakh, for taking up agriculture/allied activities.
Table No. 2 Bank Finance to Agriculture Sector in Tirunelveli District
Sl.No.
Bank Group
Agriculture sector
% to Total P.S.A
1
State Bank of India
2426574
29.50
2
Nationalized Bank
9015593
58.91
3
Private Sector Banks
3794123
54.56
4
Regional Rural Bank
2733888
63.22
5
Co-operative Bank
828602
78.55
Source: Lead Bank Annual Report 2010-11
Agricultural sectors is the major part of priority sector, which constitute
more than 60 per cent of the total advances to P.S.L. by the commercial banks,
providing advances to Agricultural sectors, Co-operative banks play a key role
which contribute 78.55 per cent of its total P.S.A to Agricultural sector, followed
by Regional Rural Bank 63.22 per cent.
Both Co-operative Bank and Regional
Rural Bank were established mainly for the purpose of promoting Agricultural

4. sector in the country. Hence they are were provided more loans to Agricultural
sector.
Agricultural sector lending by nationalised banks are also are of the
remarkable achievement in the district which provided 58.91 per cent
of its
P.S.A to Agricultural sector followed by private sector banks 54.56 per cent.
State Bank of India has given only very limited finance 29.50 per cent to
Agricultural sector during the study period.
Bank Finance to Micro and Small Enterprises sector
Direct finance to small scale industries (SSI) shall include all loans given to
SSI units which are engaged in
manufacture, processing or preservation of
goods and whose investment in plant and machinery (original cost) excluding
land and building does not exceed the amounts specified in Section I, appended.
Indirect finance to SSI shall include finance to any person providing inputs to or
marketing the output of artisans, village and cottage industries, handlooms and
to cooperatives of producers in this sector.
Table No. 3 Bank Finance to Micro and Small Enterprises sector
Sl.No.
Bank Group
MSE
% to Total P.S.A
1
State Bank of India
1155150
14.043
2
Nationalized Bank
3037579
19.848
3
Private Sector Banks
1484821
21.35
4
Regional Rural Bank
1090838
25.22
5
Co-operative Bank
78449
7.43
Source: Lead Bank Annual Report 2010-11
Micro & Small Enterpriser sectors is also are of the major players in our
economy. Which helps to provides more employment opportunities particularly
in rural areas. There sectors also needs liberal financial assistance from banks
&financial institutions in the year 2010.
Nationalised banks finance to SME
sector amounted to Rs.30,37,579 which constitute 19.85 per cent followed by
private banks (Rs.14,84,821), State Bank of India (Rs.11,55,150), Regional Rural
Bank (Rs.10,90,838) and Co-operative Banks (Rs.78,449).
But as regards,
percentage to total P.S.A., Regional Rural bank provided 25.22 per cent of its
finance to MSME followed by private sector banks 21.35 per cent , Nationalised
Bank 19.85 per cent, State bank of India 14.04 per cent and Co-operative bank

5. 7.43 per cent. Hence, it is clear that, the co-operative banks, not much interested
to provide finance to MSME in Tirunelveli District.
Bank Finance to Retail Trade Sector
Small Business / Service Enterprises shall include small business, retail
trade, professional & self employed persons, small road & water transport
operators and other service enterprises as per the definition given in Section I
and other enterprises that are engaged in providing or rendering of services, and
whose investment in equipment does not exceed the amount specified in Section
I, appended.
Table No. 4 Bank Finance to Retail Trade Sector
SL.No.
Bank Group
Retail Trade Sector
% to Total P.S.A
1
State Bank of India
286786
3.48
2
Nationalized Bank
447960
2.92
3
Private Sector Banks
888899
12.78
4
Regional Rural Bank
80424
1.86
5
Co-operative Bank
26785
2.53
Source: Lead Bank Annual Report 2010-11
Retail trade sector is a magical segment of the priority sector which are
mostly rural based and unorganized in nature.
Private sector banks are
encouraging there segments which consists of high liquidity and reliable
repayable system Rs.8,88,899 were sanctioned to RTS by private sector banks
which constitutes 12.78 per cent of its total private sector advances.
Other
Banking institutions such as State Bank of India, Nationalised bank, Regional
Rural Bank, & Co-operative Bank were provided financial assistance to RTS
amounted to in between 1-3 per cent of their total P.S.A
Bank Finance to Micro Finance to SHC/JLG/NB
Provision of credit and other financial services and products of very small
amounts not exceeding Rs. 50,000 per borrower to the poor in rural, semi-urban
and urban areas, either directly or through a group mechanism, for enabling
them to improve their living standards, will constitute micro credit.
Table No. 5. Bank Finance to Micro Finance to SHC/JLG/NB
SL.No. Bank Group
M.R to SHC/JLG/NB
% to Total P.S.A
1
State Bank of India
1368303
16.63
2
Nationalized Bank
394369
2.57

6. 3
Private Sector Banks
1333.99
0.019
4
Regional Rural Bank
368800
8.52
5
Co-operative Bank
14750
1.39
Source: Lead Bank Annual Report 2010-11
Micro finance provided to the rural poor particularly to women to
empower them in aspects.
In this regards, banks are advice to provide
Microfinance to needed people in a satisfactory level. State Bank of India has
sanctioned Rs.13,68,303 as Micro finance in the year 2010. Which constitutes
16.63 per cent of its total P.S.A, followed by Regional Rural Bank (Rs.3, 68,800)?
Nationalised Bank (Rs.3,94,369), Cooperative Bank (Rs.14,750) and Private sector
banks (Rs.1,333.99). This table reveals that, State bank of India is the major Micro
Finance provides in Tirunelveli district during the study period 2010.
Bank Finance to Education Sector
Education loans include loans and advances granted to only individuals
for educational purposes up to Rs. 10 lakh for studies in India and Rs. 20 lakh for
studies abroad, and do not include those granted to institutions;
Table No. 5 Bank Finance to Education Sector
SL.No. Bank Group
Education Sector
% to Total P.S.A
1
State Bank of India
828236
10.06
2
Nationalized Bank
1271542
8.30
3
Private Sector Banks
56506
0.81
4
Regional Rural Bank
36517
0.84
5
Co-operative Bank
14154
1.34
Source: Lead Bank Annual Report 2010-11
As per the Government of India direct in all the banks should provides
Education loans to needed students with out any securities. As per the report of
annual credit plan of Tirunelveli district, Nationalised Banks sanctioned
Educational loan amounted to (Rs.12,71,542) which is the 8.30 per cent of its total
P.S.A, State Bank of India sanctioned education loan amounted (Rs.8,28,236) ,
Private Sector bank (Rs.56,506), Regional Rural Bank (Rs.36,517) and Cooperative Bank(Rs.14,154). It is observed that Nationalised bank & State bank of
India sanctioned more Educational loans their other banks in this district.
Bank Finance to Housing Sector

7. Loans up to Rs. 15 lakh for construction of houses by individuals,
(excluding loans granted by banks to their own employees) and loans given for
repairs to the damaged houses of individuals up to Rs.1 lakh in rural and semiurban areas and up to Rs.2 lakh in urban areas.
Table No. 7 Bank Finance to Housing Sector
Sl.No.
Bank Group
Housing Sector
% to Total P.S.A
1
State Bank of India
2160310
26.26
2
Nationalized Bank
1136454
7.42
3
Private Sector Banks
727315
10.46
4
Regional Rural Bank
13333
0.30
5
Co-operative Bank
92002
8.72
Source: Lead Bank Annual Report 2010-11
Housing finance in a emerging segment of loan which consists of one of
the revenue generation loan to the sanctioned banks.
Sate bank of India sanctioned more housing finance which amounted to
Rs.21,60,310
(26.26
per
cent
of
bank(Rs.11,36,454), Private sector
P.S.A)
,
followed
by
Nationalised
bank (Rs.7,27,315), Co-operative bank
(Rs.92,002) and Regional Rural bank (Rs.13,333). Sate bank of Indi and private
sector banks are provides liberalized finance to housing sectors which
constituted to 26.26 per cent and 10.46 per cent of total P.S.A respectively.
Suggestions
This study reveals the following the important suggestions which will be
helpful to improve the performance of banking sectors with reference to priority
sector lending in the study area.
Priority sector is one of the emerging segments of the Indian economy
which contributes more employment opportunities, poverty alleviation, promote
rural earning capacity and remove regional imbalances. Hence there is a need to
flow of proper and sufficient credit should be confirmed by the concerned
authorities.
Banks are responsible to simplify their credit terms to Priority sector
which are mostly engaged by rural and uneducated people, and not to produce
any collateral security against loan.

8. Agriculture sectors loan amounted to more than 50 per cent by banks in
Tirunelveli district. But these amounts have been sanctioned to the real
beneficiaries for agriculture purpose may not be guaranteed by the bankers.
Attitude of bank officials should be improved while sanction loans to
these sectors. Opening of savings account in the nationalised banks is not
encouraged or interested by the bank employees in most of the cases. The success
or failure of the banks are fully depends on the employees of the banks. Hence
bank employees must
responsible for the deposits and lending of loans in each and every banks.
Conclusion
The priority sector lending is mainly intended to ensure that the assistance
from the banking system to those sectors of the economy which has not received
adequate support of institutional finance. The attainment of the socio economic
priorities of the government like growth of agriculture, promotion of small
entrepreneurs and development of backward area etc is the major responsibility
of commercial banks. Since seventies, Reserve Bank of India and government of
India have stipulated guidelines for priority sector lending by banks. It concludes
that the bank finance to priority sector lending is inevitable part of our banking
system as well as our economic development.
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