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Home Economy

Priority Sector Lending

September 30, 2020
in Economy
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Priority Sector Lending
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Reserve Bank of India has comprehensively reviewed the Priority Sector Lending (PSL) guidelines to align it with emerging national priorities and bring sharper focus on inclusive development, after having wide ranging discussions with all stakeholders. Revised PSL guidelines 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 categories under priority sector are as follows:

. Agriculture

. Micro, Small and Medium Enterprises

. Export Credit

. Education

. Housing

. Social Infrastructure

. Renewable Energy

. Others

Targets for individual sectors

CategoriesDomestic commercial banks (excl. RRBs & SFBs) & foreign banks with 20 branches and aboveForeign banks with less than 20 branchesRegional Rural BanksSmall Finance Banks
Total Priority Sector40% of ANBC or CEOBE whichever is higher.40% of ANBC or CEOBE whichever is higher; out of which up to 32% can be in the form of lending to Exports and not less than 8% can be to any other priority sector75% of ANBC or CEOBE whichever is higher; However, lending to Medium Enterprises, Social Infrastructure and Renewable Energy shall be reckoned for priority sector achievement only up to 15% of ANBC.75% of ANBC  or CEOBE whichever is higher.
Agriculture18% of ANBC or CEOBE, whichever is higher; out of which a target of 10% is prescribed for Small and Marginal Farmers (SMFs)Not applicable18% ANBC or CEOBE, whichever is higher; out of which a target of 10% is prescribed for SMFs18% of ANBC or CEOBE, whichever is higher; out of which a target of 10% is prescribed for SMFs
Micro Enterprises7.5% of ANBC or CEOBE, whichever is higherNot applicable7.5% of ANBC or CEOBE, whichever is higher7.5% of ANBC or CEOBE, whichever is higher
Advances to Weaker Sections12% of ANBC or CEOBE, whichever is higherNot applicable15% of ANBC or CEOBE, whichever is higher12% of ANBC or CEOBE, whichever is higher

ANBC= Adjusted Net Bank Credit

CEOBE= Credit Equivalent of Off-Balance Sheet Exposures

Advantages of Priority Sector Lending

  • Increase in industries and allied activities at grass root level
  • Improved living standards of rural people
  • Poverty eradication
  • Development of infrastructure in rural areas  
  • Increase in production of agriculture and allied goods  
  • Support to gross domestic product
  • Providing new opportunities for productive and gainful self-employment to the educated unemployed youth
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Source: RBI website
Tags: Prelims

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