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Priority Sector Lending

  • August 7, 2020
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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Subject: Economy

Context:

The Reserve Bank of India (RBI) decided to broaden the scope of priority sector lending (PSL) by including start-ups and enhancing borrowing limits for renewable energy sectors.

Concept:

  • Priority Sector refers to those sectors of the economy which may not get timely and adequate credit.
  • Priority Sector Lending is an important role given by the Reserve Bank of India (RBI) to the banks for providing a specified portion of the bank lending to few specific sectors.
  • As per the RBI circular released in 2016, there are eight broad categories of the Priority Sector Lending. They are: (1) Agriculture (2) Micro, Small and Medium Enterprises (3) Export Credit (4) Education (5) Housing (6) Social Infrastructure (7) Renewable Energy (8) Others.

Targets:

  • 40 per cent of Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher for domestic scheduled commercial banks (excluding Regional Rural Banks and Small Finance Banks) and Foreign banks with 20 branches and above
  • 40 per cent of Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher, to be achieved in a phased manner by 2020 for Foreign banks with less than 20 branches
economy Priority Sector Lending

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