These developments have been possible to banks because the overall flexibility now available in the interest rate structure has enabled them to reduce their deposit rates and still improve their spreads. In terms of priority sector credit also, the element of subsidisation has been removed although some sort of directed lending to Agriculture, Small Scale Industry (SSI) and export sector have been retained.
The definition of priority sector has been gradually increased to help banks make loans on commercially viable terms. However, the actual experience has been that the credit pick up is not up to the mark and has been generally less than projected by the RBI in its monetary policies, in a number of years.