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5) Priority Sector Lending  in Agriculture is often seen to be negatively correlated to the climatic conditions of a region. Critically analyse the statement in the backdrop of a recent move of the Banks that decided not to extend loans to regions hit by drought in India.(250 words)

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Topic:  Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

5) Priority Sector Lending  in Agriculture is often seen to be negatively correlated to the climatic conditions of a region. Critically analyse the statement in the backdrop of a recent move of the Banks that decided not to extend loans to regions hit by drought in India.(250 words)

The hindu

Why this question:

Recently Bank of Maharashtra, a state-run lender, has decided not to extend loans in eight zones in Maharashtra and Madhya Pradesh which are hit by drought. Thus it becomes necessary for us to analyse the correlation of droughts and priority sector lending in agriculture.

Key demand of the question:

Analyse in  detail the negative correlation of climatic conditions of a region with that of lending by Banks to the farmers.

Directive word:

Critically analyzeWhen asked to analyze, you  have to examine methodically the structure or nature of the topic by separating it into component parts and present them as a whole in a summary. When ‘critically’ is suffixed or prefixed to a directive, one needs to look at the good and bad of the topic and give a fair judgement.

Structure of the answer:

Introduction:

In a few introductory lines explain the context of the question.

Body:

In brief discuss –

  • Explain Priority Sector Lending (Agriculture)?  – Priority Sector includes the following categories: (i) Agriculture, (ii) Micro, Small and Medium Enterprises, (iii) Export Credit, (iv) Education, (v) Housing, (vi) Social Infrastructure, (vii) Renewable Energy and (viii) Others. The activities covered under Agriculture are classified under three sub-categories viz. Farm credit, Agriculture infrastructure and Ancillary activities.
  • Why Banks are defying the lending to drought hit regions? – Bad loans from agricultural advances in the branches of such zones, present pathetic condition of agriculture owing to water distress etc.
  • Explain why is there a negative correlation? What are its impact ?
  • What should be the remedial action?

Conclusion:

          Conclude with what needs to be done to address the situation.