ANBC full form in banking is Adjusted Net Bank Credit. It is a term used in the banking sector to refer to the total credit provided by banks to various sectors, adjusted for certain factors such as the credit provided to priority sectors, investments made by banks in bonds, and other specified adjustments. The concept of ANBC is essential for assessing the flow of credit to the economy, particularly in alignment with the goals set by the central bank, such as the Reserve Bank of India (RBI).
How ANBC Works
Adjusted Net Bank Credit is calculated by considering a bank’s total credit extended to customers, and then adjusting this figure for certain factors that may not directly contribute to the economy’s productive sectors. For example, it excludes investments in government bonds or other low-risk assets. The result is the ANBC, which represents the true amount of credit that banks have extended to the real economy.
The ANBC is often used by regulatory authorities like the RBI to monitor the credit flow to priority sectors, such as agriculture, micro, small, and medium enterprises (MSMEs), and weaker sections of society. This helps the authorities gauge whether banks are meeting the targets set under various government initiatives, such as the Priority Sector Lending (PSL) norms.
Importance of ANBC
- Regulatory Monitoring: ANBC helps regulators assess the effectiveness of credit distribution to priority sectors and ensure that banks are adhering to the requirements of credit flow in these sectors.
- Economic Growth: By adjusting the total credit provided by banks, ANBC reflects the true contribution of credit to sectors that drive economic growth and job creation.
- Risk Management: Banks also use ANBC to gauge the effectiveness of their lending practices and avoid excessive concentration of credit in high-risk sectors.