What Happened
- NABARD has projected Rs 4.88 lakh crore in priority sector credit potential for Rajasthan for FY 2026-27 through its State Focus Paper (SFP).
- The State Focus Paper provides a district-wise and sector-wise assessment of credit potential and absorption capacity under priority sector lending.
- Rajasthan's Chief Secretary stated that NABARD's credit planning aligns financial institutions with the state's development priorities.
- Similar State Focus Papers have been released for other states: Telangana (Rs 4.43 lakh crore), Haryana (Rs 3.67 lakh crore), Odisha (Rs 3.15 lakh crore), and Himachal Pradesh (Rs 45,810 crore).
- The SFPs emphasise agriculture, allied sectors, MSMEs, and rural infrastructure as priority areas.
Static Topic Bridges
Priority Sector Lending (PSL) Framework
Priority Sector Lending (PSL) is an RBI-mandated framework requiring scheduled commercial banks to allocate a minimum percentage of their Adjusted Net Bank Credit (ANBC) to specified sectors considered critical for economic development. The PSL targets were last revised by RBI in September 2020. All domestic scheduled commercial banks (including SFBs) must allocate 40% of ANBC to priority sectors. Within this, specific sub-targets exist for agriculture (18%), micro enterprises (7.5%), and weaker sections (12%).
- PSL target: 40% of ANBC for domestic banks; 40% for foreign banks with 20+ branches; 40% for SFBs
- Sub-targets: Agriculture (18%, of which 10% direct agriculture); Micro enterprises (7.5%); Weaker sections (12%)
- Categories: Agriculture, MSMEs, Education loans, Housing, Social infrastructure, Renewable energy, Export credit
- Shortfall mechanism: Banks failing to meet PSL targets must deposit shortfall in RIDF (Rural Infrastructure Development Fund) maintained by NABARD
- Priority Sector Lending Certificates (PSLCs): tradable instruments allowing banks to meet PSL targets by purchasing certificates from surplus banks
- Housing loan cap for PSL: Rs 35 lakh in metropolitan centres; Rs 25 lakh in other areas
Connection to this news: NABARD's State Focus Paper provides the ground-level credit potential assessment that guides bank lending under the PSL framework, ensuring that credit flows are aligned with district-level economic opportunities rather than being concentrated in urban centres.
NABARD -- Structure, Functions, and Rural Credit Architecture
The National Bank for Agriculture and Rural Development (NABARD) was established on July 12, 1982, on the recommendation of the Shivaraman Committee (Committee to Review Arrangements for Institutional Credit for Agriculture and Rural Development, 1979). NABARD is the apex development financial institution for rural and agricultural credit. It refinances rural lending institutions (cooperative banks, regional rural banks, commercial banks), and formulates policies for rural credit delivery.
- NABARD established: July 12, 1982; under NABARD Act, 1981
- Headquarters: Mumbai; wholly owned by Government of India (100% since 2019)
- Shivaraman Committee (1979): recommended creation of NABARD by transferring agricultural credit functions from RBI
- Key functions: refinancing, development (watershed, tribal, SHG), supervision (cooperative banks, RRBs), policy formulation
- RIDF (Rural Infrastructure Development Fund): created 1995-96; cumulative sanctions: over Rs 4.5 lakh crore
- NABARD's credit planning: releases State Focus Papers and Potential Linked Credit Plans (PLCPs) annually for each district
Connection to this news: The Rs 4.88 lakh crore credit projection for Rajasthan is part of NABARD's annual credit planning exercise, where Potential Linked Credit Plans prepared at the district level are aggregated into State Focus Papers that guide bank lending priorities.
Rural Credit Delivery System -- Institutional Architecture
India's rural credit delivery system operates through a multi-layered institutional architecture: commercial banks (public and private), Regional Rural Banks (RRBs), and cooperative credit institutions (State Cooperative Banks, District Central Cooperative Banks, and Primary Agricultural Credit Societies). The Vaidyanathan Committee (2004) recommended restructuring of the cooperative credit structure. RRBs, established under the RRB Act 1976, specifically target rural and semi-urban areas.
- RRBs: 43 RRBs (post-consolidation); sponsored by scheduled commercial banks; 50% Centre, 15% state, 35% sponsor bank equity
- Cooperative credit structure: 3-tier (SCBs-DCCBs-PACS for short-term); State Cooperative Agriculture and Rural Development Banks for long-term
- PACS (Primary Agricultural Credit Societies): approximately 1 lakh across India; last mile rural credit delivery
- Kisan Credit Card (KCC): approximately 7.4 crore active KCC accounts; provides crop loans, term loans, consumption credit
- PM-KISAN: Rs 6,000/year direct transfer to farmer families (not credit, but supplements credit access)
- Agricultural credit target (2025-26): Rs 22 lakh crore (Union Budget announcement)
Connection to this news: NABARD's state-level credit projections guide the entire rural banking architecture -- from commercial banks to RRBs to cooperative societies -- ensuring that credit supply matches local agricultural and developmental needs identified through district-level planning.
Key Facts & Data
- NABARD credit projection for Rajasthan (FY27): Rs 4.88 lakh crore
- Other state projections: Telangana (Rs 4.43 lakh crore), Haryana (Rs 3.67 lakh crore), Odisha (Rs 3.15 lakh crore)
- PSL target: 40% of ANBC for all domestic banks
- Agriculture sub-target: 18% of ANBC (10% for direct agriculture)
- NABARD established: July 12, 1982; fully government-owned since 2019
- RRBs: 43 (post-consolidation); PACS: approximately 1 lakh nationwide
- Agricultural credit target (2025-26): Rs 22 lakh crore