Comparative Analysis of Indian Banking Industry Through Priority Sector Advances

Priority Sector refers to those sectors of the economy which may not get timely and adequate credit in the absence of the special dispensation. Priority Sector Lending is an important role given by the Reserve Bank of India (RBI) to the banks for providing at least 40% of their loans (measured in terms of Adjusted Net Bank Credit or ANBC) to borrowers in the priority sectors category like agriculture and allied activities, micro and small enterprises, poor people for housing, students for education and other low income groups and weaker sections etc. This is essentially meant for an all round development of the economy as opposed to focusing only on the financial sector. Thus Priority Sector Advances constitutes very large proportion of the Total Advances in Banks Balance Sheet. The present study attempts to analyze the Impact of Priority Sector Advances on Profitability of PSU Banks, Private sector Banks and Foreign Banks of India. Ratios of Priority Sector Advances to Total Advances (PSATA) of banks were taken as an independent variables whereas, Return on Assets (ROA), Return on Investment (ROI), Return on Equity (ROE), Ratio of Operating Profit to Total Assets, (OPTA), and Ratio of Interest Income to Total Assets (INTTA) were taken as dependent variables. The study covers the period ranging from financial year 2004-5 to 2015-16 and entire dataset was taken from Reserve Bank of India website