The government on Friday ruled out increasing the amount reserved for priority sector lending from the present 40 per cent saying the banks have to maintain statutory reserves.

“It is not possible to increase the priority sector lending from 40 per cent as out of total deposits, banks have to keep a certain amount to maintain Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) and from the remaining disposable amount 40 per cent is dedicated for the priority sector,” Finance Minister Pranab Mukherjee said in the Lok Sabha during Question Hour.

Jagdish Sharma (JD-U) had demanded an increase in the priority sector lending to 75 per cent in view of inclusion of the service sector in the list of borrowers in the priority sector.

The basic objective of setting priority sector targets has been to ensure greater flow of credit to certain sectors where credit would normally not flow to the desired extent, the minister said.

Replying to a supplementary, he said, as of March this year, out of 27 Public Sector Banks, 24 had achieved the stipulated target of 40 per cent and out of 22 private sector banks, 17 had achieved the target.

The domestic commercial banks, which fail to achieve the priority sector targets, are required to deposit shortfall amounts into Rural Infrastructure Development Fund set up with NABARD and other funds as decided by the RBI.

The foreign banks operating in India, who have target of 32 per cent lending to priority sector, are also required to deposit shortfall amounts into certain funds set up with Small Industries Development Bank of India (SIDBI) or other financial institutions, as decided by the RBI.

On quantum of loans disbursed to the sector, Mukherjee said, as reported by RBI, the total loans outstanding to service sector, as on the last reporting Friday of March 2009 for all scheduled commercial banks was Rs 83,842 crore (provisional).

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