RBI Notifications

Priority Sector Lending (PSL)

Note4Students

From UPSC perspective, the following things are important :

Prelims level : PSL

Mains level : PSL

The RBI has released a revised priority sector lending guidelines to augment funding to segments including start-ups and agriculture.

New Priority Sector Lending (PSL) guidelines

  • Bank finance of up to ₹50 crores to start-ups, loans to farmers both for installation of solar power plants for Solarization of grid-connected agriculture pumps and for setting up compressed biogas (CBG) plants have been included as fresh categories eligible for finance under the priority sector.
  • This has come to align it with emerging national priorities and bring a sharper focus on inclusive development, after having wide-ranging discussions with all stakeholders.
  • It will enable better credit penetration to credit deficient areas, increase the lending to small and marginal farmers and weaker sections, boost credit to renewable energy, and health infrastructure
  • The targets prescribed for ‘small and marginal farmers’ and ‘weaker sections’ are being increased in a phased manner.
  • Higher credit limit has been specified for farmer producer organisations (FPOs)/farmers producers companies (FPCs) undertaking farming with assured marketing of their produce at a pre-determined price.

Back2Basics: Priority Sector Lending

  • PSL is an important role given by the (RBI) to the banks for providing a specified portion of the bank lending to few specific sectors like agriculture and allied activities, micro and small enterprises, poor people for housing, students for education and other low-income groups and weaker sections.
  • This is essentially meant for an all-round development of the economy as opposed to focusing only on the financial sector.
  • The broad categories of priority sector for all scheduled commercial banks are as under:
  1. Agriculture and Allied Activities (Direct and Indirect finance)
  2. Small Scale Industries (Direct and Indirect Finance)
  3. Small Business / Service Enterprises
  4. Micro Credit
  5. Education loans
  6. Housing loans
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