View of A STUDY OF LOAN PROVIDED BY SBI UNDER PRIORITY SECTOR LENDING (IMPACT ON ECONOMIC AND SOCIAL CONDITIONS OF BENEFICIARY)

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A STUDY OF LOAN PROVIDED BY SBI UNDER PRIORITY SECTOR LENDING (IMPACT ON ECONOMIC AND SOCIAL CONDITIONS OF BENEFICIARY)

Dr. Neha Garg¹ Dr. Priyanka Sharma²

1Asst. Prof. Annie Besant College, Indore

2Director CH College, Mhow

Abstract- Priority Sector Lending (PSL) is an attempt by Reserve Bank of India to channelize financial assistance to neglected sector of economy. Priority Sector lending includes agriculture, Small scale industries, weaker sections, education and housing etc. RBI has done various changes in PSL guidelines time to time. There are various researches which study the effect of PSL on economy, banks and beneficiaries. It is also found indifferent studies that there are various quality issues in PSL. In this study researcher try to find out the impact on economic and social conditions of beneficiary after avail the loan.

Keywords: Priority Sector Lending, Agriculture, Non Performing Assets (NPA), Reserve Bank of India(RBI), Private Banks, Public Banks.

1 INTRODUCTION

Banks play a key role in the development and growth of country’s economy. Nationalization of banks has resulted in expansion of branch network particularly in un-banked and under- bank centers thereby reducing regional disparities and enhancing economic development and growth of the country. There ole of commercial banks in India has been undergoing changes in response to the emerging of economic environment. Generally, commercial banks have been crowned as “nerve centre of all economic activity” (Thangasamy, 2014). Among the commercial banks, the State Bank of India, considered to be pre-eminent in banking and appears to be predominant in providing valuable services to the people of rural as well as urban areas. As the banks have a large network of branches in the rural are as of different district they are endowed with financial and manpower resources for the development of the district. In 1969 the Lead Bank Scheme, was introduced for branch expansion and the same was used to grant and monitor the loans to the priority sectors. Under this the banks are allotted different districts and they act as leader for coordinating the endeavor of these institutions in the district to increase the flow of credit to the priority sectors that is agriculture, small scale industries (SSI) and other economic activities etc in the rural as well as semi-urban.

In Madhya Pradesh the State Bank of India has opened its branches as lead banks in Chhatarpur, Damoh, Harda, Katni, Panna, Tikamgarh, Umaria, Ashoknagar, Guna, Shivpuri, sheopur, Neemuch and Vidisha etc. to provide loans to the priority sectors. Thus Commercial banks play important role in financing the priority sectors of the economy. The Priority sector lending scheme adopted by commercial banks has provided a major tool for allocation of financial resources to agriculture, small scale enterprises and to the schemes for self-employment, education loan, housing, weaker sections etc. In India's present liberalized economy, the survival and growth of small-scale Industry (SSI) largely depends on its ability to innovate, improve operational efficiency and increase productivity. The small-scale industries, generate a vast employment opportunities further leading to the economic growth and overall development of the nation.

2 REVIEW OF LITERATURE

Rani and Garg (2015) in her paper titled “Priority Sector Lending: Trends, Issues and Strategies” described the trends of priority sector advances by public, private and foreign banks during 2011-12 to 2012-13.Though the targets were fixed by RBI for the banks but it was achieved by foreign banks only whereas the public and private sector banks could not do so. It was found that a target of 32% was achieved by foreign banks. It was also found that the problems like Low Profitability, High NPAs, Quantitative targets, Government interferences etc. faced by banks for achieving the target sand further found that how to overcome these issues. The study revealed that Priority Sector Lending adopted by public sector and private sector banks have not achieved their overall targets.

Goswami (2014) studied the problems of small scale industries of Madhya Pradesh and the ability of microfinance institutions towards transforming microbusinesses to formal

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small scale enterprise. Micro Finance Institutions provided credit to the poor without any collateral security for the development of Small scale industries. The study revealed that Small scale businesses have knowledge about the existence of MFIs and acknowledge the positive contributions of MFIs loans towards promoting their growth.

Shabbir (2013) analysed the disintegration of Priority Sector Advances to Sub- sectors within the overall Priority Sector advances (PSA). The aim of the comparative analysis of Agricultural Sector advances and Small Scale Industries advances by SCBs and PSBs (Public Sector Banks) from 1969 to 2011. It was found that the share of PSBs in MSE was higher as compared to SCBs. Thus, the

Indirect advances to agriculture have increased while the direct advances decreased from 80% to 68%. Thus the results revealed that Non Public Sector Scheduled Commercial banks gave lesser percentage in terms of direct credit to agriculture and more to indirect credit.

Kumarand Gambhir (2012) studied the problems and prospects of commercial banks in financing Priority Sector Lending. They found that public sector banks achieved the target set by RBI. Suggestion to revise the targets and sub-targets set by RBI for this scheme was stated and the eligibility for SSI, SSB and weaker section to be redefined on the basis of rational. For the recoveries of NPA (in case of weaker section) – A special model i.e.

micro financing has to be formed with the recovery rate of 95%. Thus the impact of Priority Sector Lending scheme was found positive.

2.1 Objectives

1 To study whether the loan availed by the borrowers has made changes in their economic and social status after post loan availing period.

2 To study the satisfaction level of the beneficiaries for the loan availed under Priority Sector Lending.

3 To offer a suggestion to progress the performance of this scheme.

3 RESEARCH METHOD

To study the objective and hypothesis developed for the study, exploratory survey metho disused.

3.1 Universe

The target population for there search study comprises all beneficiaries of Priority sectors and Bank Managers of State Bank of India in Indore region.

3.2 Sample Method

Keeping in view the objectives of the present study, Non Probability convenient sampling technique was adopted for collecting the sample.

3.3 Sample Size

Initially 278 samples were taken for the study but after validation the number of samples were found fit for study were150.

3.4 Sample Unit

The sample unit for the research study comprises all beneficiaries of Priority sector lending and Bank Managers of all the branches of State Bank of India in Indore Region.

3.5 Variables

The present study involved two types of variables i.e. Dependent Variable and Independent Variable and these were taken in to consideration accordingly in data presentation and analysis.

4 METHOD OF DATA ANALYSIS

The analysis of data was done by using appropriate statistical tools like percentage, average, correlation and non-parametric test (Chi-Square test). The collected data was analyzed and results were inferred with the help of “SPSS20.0” and “MSExcel2007”. For the documentation MS word 2007 was used.

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4.1 HYPOTHESIS:

H01 : The purpose or the goal of the loan availed by the beneficiaries under Priority Sector Lending is not fulfilled.

H1 : The purpose or the goal of the loan availed by the beneficiaries under Priority Sector Lending is fulfilled.

H02: Bank loan availed under Priority Sector Lending by the beneficiaries of diverse living conditions does not have impact on their economic and social status.

H2: Bank loan availed under Priority Sector Lending by the beneficiaries of diverse living conditions has impact on their economic and social status.

4.2 Testing of Hypothesis

The following table no 1.0 shows Cross-Tabulation of Purpose or goal of the loan achieved and Change Economic and Social Status after availing the Loan. The Figure Nos in BOLD are the prominent ones. This includes the answer given by the respondents that their economic and social status has been raised and thus their goal has been achieved.

Table No-1.0 Purpose or goal of the loan achieved* Change Economic& Social Status after availing the Loan Cross tabulation

Change Economic & Social Status

after availing the Loan Total Raised Lowered No Change

Purpose or goal of the loan achieved Yes

Count 67 15 32 114

Expected Count 59.3 19.0 35.7 114.0

% within Purpose or goal of the loan

achieved 58.8% 13.2% 28.1% 100.0%

% within Change Economic &Social Status

after availing the Loan 85.9% 60.0% 68.1% 76.0%

% of Total 44.7% 10.0% 21.3% 76.0%

No

Count 11 10 15 36

Expected Count 18.7 6.0 11.3 36.0

achieved 30.6% 27.8% 41.7% 100.0%

after availing the Loan 14.1% 40.0% 31.9% 24.0%

% of Total 7.3% 6.7% 10.0% 24.0%

Total

Count 78 25 47 150

Expected Count 78.0 25.0 47.0 150.0

achieved 52.0% 16.7% 31.3% 100.0%

after availing the Loan 100.0% 100.0% 100.0% 100.0%

% of Total 52.0% 16.7% 31.3% 100.0%

The following table no 1.1 shows result of Chi-Square Test Chi-Square Tests

Value df Asymp. Sig.(2-sided)

Pearson Chi-Square 9.312^a 2 .010

Likelihood Ratio 9.344 2 .009

Linear-by-Linear Association 6.010 1 .014

N of Valid Cases 150

a.0cells(.0%)have expected count less than 5.Theminimumexpectedcountis 6.00.

χ² (2, 1, N = 150) = 9.312, p < 0.05(p=0.010). There is a strong association exists between Purpose or goal of the loan achieved and Change Economic and Social Status after availing the Loan.

The following table no 1.2 shows Correlation Measure r (150) = 0.801, p <0.05(p=0.014).

There is positive and strong relationship between variables. The alpha value is below 0.05 which signifies that variables are significant relation with each other.

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Table No- 1.2 Symmetric Measures

Value Asymp. Std.

Error^a

Approx. T^b Approx.

Sig.

Interval by Interval Pearson's R .801 .079 2.494 .014^c Ordinal by Ordinal Spearman

Correlation .811 .078 2.627 .010^c

a. Not assuming the null hypothesis.

b. Using the asymptotic standard error assuming the null hypothesis.

c. Base don normal approximation.

Following is the graph depicting the Chi-Square Test. The clustered bar chart produced that highlights the group categories and the frequency of counts in these groups. This represents that association of Purpose or goal of the loan achieved and Change Economic and Social Status after availing the Loan is exclusively spread.

Following is the case processing summary for the Chi-Square Test between Purpose or goal of the loan achieved and Preference for the Loan desired.

Case Processing Summary Cases

Valid Missing Total

N Percent N Percent N Percent Purpose or goal of the loan

achieved*Preference for the

Loan desired 150 100.0% 0 0.0% 150 100.0%

The following table no 1.3 shows Cross-Tabulation of Change Economic and Social Status after availing the Loan and Approached the Bank again for the same type of loan. The Figure Nos in BOLD are the prominent ones. This includes the answer given by the respondents in affirmation that their economic and social standard has been raised and they will again approach to bank for such type of loan.

Table No- 1.3

Change Economic and Social Status after a vailing the Loan*Approached the Bank again for the same type of loan Cross tabulation

Approached the Bank again for the same type

of loan Total

Yes No

Change Economic and Social Status after availing the Loan Raised

Count 65 13 78

%within Change Economic and Social Status after

availing the Loan 83.3% 16.7% 100.0%

%within Approached the Bank again for the same type of

loan 62.5% 28.3% 52.0%

% of Total 43.3% 8.7% 52.0%

Lowered

Count 12 13 25

availing the Loan 48.0% 52.0% 100.0%

loan 11.5% 28.3% 16.7%

% of Total 8.0% 8.7% 16.7%

No Change Count 27 20 47

% within Change Economic and Social Status after

loan 26.0% 43.5% 31.3%

% of Total 18.0% 13.3% 31.3%

Total

Count 104 46 150

loan 100.0% 100.0% 100.0%

% of Total 69.3% 30.7% 100.0%

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The following table no 1.4 shows result of Chi-Square Test Table No- 1.4 Chi-Square Tests

Value df Asymp. Sig.(2-sided) Pearson Chi-Square 15.665^a 2 .000

Likelihood Ratio 15.908 2 .000

Linear-by-Linear Association 10.734 1 .001 N of Valid Cases 150

a.0cells (.0%) have expected count less than 5. The minimum pected count is 7.67.

χ² (2, 1, N = 150) = 15.665, p < 0.05(p=0.000). There is a strong association exists between Change Economic and Social Status after availing the Loan and Approached the Bank again for the same type of loan.

The following table no 1.5 shows Correlation Measure r (150) = 0.768, p <0.05(p=0.001).

There is positive relationship between variables. The alpha value is below 0.05 which signifies that variables are significant relation with each other.

Table No- 1.5 Symmetric Measures

Value Asymp. Std.

Error^a Approx.

Tb Approx.

Sig.

Interval by Interval Pearson's R .768 .078 3.390 .001^c Ordinal by Ordinal Spearman

Correlation .781 .078 3.560 .000^c

a. Not assuming the null hypothesis.

b. Using the asymptotic standard error assuming the null hypothesis.

c. Based on normal approximation.

Following is the graph depicting the Chi-Square Test. The clustered bar chart produced that highlights the group categories and the frequency of counts in these groups. This represents that association of Change Economic and Social Status after availing theLoan and Approached the Bank again for the same type of loan is exclusively spread.

Graph No

5 CONCLUSION

The economic development of a country primarily depends upon the establishment and growth of Priority Sector Lending. They play an important role in enhancing the overall economic growth and development of an economy. The strength of small scale enterprises lies in their wide spread in rural, semi –urban and urban areas, nurturing entrepreneurial base. This sector requires sufficient amount of capital to achieve a balanced growth. Thus it envisaged the involvement of scheduled commercial banks in the financing of priority sectors

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especially the Small Scale Industries. Among the commercial banks, the State Bank of India(SBI) plays a major role in providing loan to these sectors with the help of Lead bank Scheme, so that the aim of balance growth throughout the country could be achieved. Thus an effort has been made to trace the growth of PSI concept and the role of SBI in its development.

BIBLIOGRAPHY:

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