Priority Sector Lending

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