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CS Professional · Banking and Insurance - Laws and Practice · Various Government Schemes

A bank's Adjusted Net Bank Credit (ANBC) is Rs 8,000 crore. Under the RBI priority sector lending norms, a domestic scheduled commercial bank must lend 40% of ANBC to the priority sector. The bank's priority sector lending is Rs 2,960 crore. What is the shortfall, and where would it typically be deposited?

The target is 40% of Rs 8,000 crore, which is Rs 3,200 crore. Actual lending is Rs 2,960 crore, giving a shortfall of Rs 240 crore. Such shortfalls are normally placed in funds like RIDF with NABARD or other institutions RBI specifies.

  1. ARs 240 crore, to be deposited with funds such as RIDF maintained by NABARD or other specified institutionsCorrect
  2. BRs 240 crore, to be deposited with SEBI
  3. CRs 3,200 crore, to be surrendered to the government as a fine
  4. DNo shortfall, as the bank has crossed 35% of ANBC

Explanation

Target = 40% x 8,000 = Rs 3,200 crore. Actual = Rs 2,960 crore, so shortfall = 3,200 - 2,960 = Rs 240 crore. Banks with shortfalls contribute to funds such as RIDF with NABARD and other institutions specified by RBI. The 35% option uses the wrong target, since 35% of 8,000 is Rs 2,800 crore.

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