Financial inclusion is one of the main aims of the government. A large portion of India's population remains unbanked and without access to credit. In light of this, domestic banks have to lend at least 40% of their loan book to the priority sector. This includes sectors like agriculture, small scale industries, microfinance etc. If banks are unable to meet these steep targets, they have to invest in low yielding Rural Infrastructure Development Fund (RIDF) bonds. Or they can try and meet their targets by investing in securitized assets of their NBFC peers. But rather than just meeting targets, our hope is that banks will work harder on actually uplifting the weaker sections of our country. This will be more beneficial for the country in the long run.
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