Reserve Bank of India (RBI) has issued a Master Circular on Priority Sector Lending – Targets and Classification on dated July 1, 2015. The targets / sub-targets set under priority sector lending for all Scheduled Commercial Banks are furnished below:

Categories	Domestic SCBs with 20 branches and above
Total Priority Sector	40 percent of Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher
Agriculture	18 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher
Micro Enterprises	7.5 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher to be achieved in a phased manner
Advances to Weaker Sections	10 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher

RBI vide its guidelines on Interest Rate on Advances dated 17th December 2015 followed by Master Direction dated 29th March 2016 on Interest Rate on Advances, have directed all Scheduled Commercial Banks to calculate Base Rates using the Marginal Cost of Funds. The Government and RBI do not interfere in fixing the interest rate on loans. Presently, each bank fix the Marginal Cost Lending Rate (MCLR) based on RBI guidelines and varies from bank to bank.

This was stated by Shri Santosh Kumar Gangwar, Minister of State in the Ministry of Finance in written reply to a question in Lok Sabha.

Priority sector lending targets require scheduled commercial banks to meet specified ANBC proportions; banks set MCLRs using marginal cost of funds. Reserve Bank directives require Domestic Scheduled Commercial Banks to meet priority sector lending targets measured against Adjusted Net Bank Credit or off balance sheet equivalents, with dedicated sub targets for agriculture, micro enterprises (phased) and advances to weaker sections. Banks must compute base lending rates using the marginal cost of funds, and individual banks set their Marginal Cost Lending Rates under RBI guidelines, producing variation in lending rates.