Economics • Banking & FinanceHard
How do Regional Rural Banks operating in Punjab balance their statutory priority sector lending targets with commercial viability under NABARD's developmental oversight?
A. By cross-subsidizing low-interest agricultural loans with higher-yield retail credit while utilizing refinance facilities from NABARD✓ Correct Answer
B. By exclusively lending to large multinational corporations located in Chandigarh and Mohali
C. By eliminating all rural lending portfolios to avoid non-performing asset accumulation entirely
D. By investing 100 percent of their deposit base in international equity markets
💡 Solution & Explanation
Regional Rural Banks meet priority sector targets by channeling credit to agriculture and micro-enterprises, supported by concessional refinance from NABARD and balanced by general retail lending. Lending exclusively to multinationals violates regional rural bank mandates. Eliminating rural lending contradicts their foundational statutes. Investing entirely in equity markets breaches prudential investment guidelines set by financial regulators.
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