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Financing Priority Sector in the economy is not strictly on
commercial basis as not only the general approach is liberal but also the rate of interest
charged on such loans is less. Export finance is, in fact, available at a discount of 20%
or more on the normal rate of interest to Indian corporates. Part of the cost of this
concession is borne by RBI by means of refinancing such loans at concessional rate. Indian
Banks, therefore, contribute towards economic development of the country by subsidizing
the business activities undertaken by entrepreneurs in the areas which are consider
"priority sector" by RBI. |
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