Priority Sector Lending (PSL) guidelines

Reserve Bank of India (RBI) released revised priority sector lending (PSL) guidelines to augment funding for COVID-19 impacted companies.

Facts:

• Aim: To align Priority Sector lending with emerging national priorities and bring sharper focus on inclusive development.
• Key Revised PSL Guidelines:
  • Bank finance for start-ups (up to ₹50 crore), loans to farmers for installation of solar power plants for solarisation of grid connected agriculture pumps and loans for setting up Compressed BioGas (CBG) plants have been included as fresh categories eligible for finance under the priority sector.
  • The targets prescribed for “small and marginal farmers” and “weaker sections” are being increased in a phased manner.
  • The loan limits for renewable energy have been doubled and for improvement of health infrastructure, credit limit for health infrastructure (including those under ‘Ayushman Bharat’) has been doubled.

About Priority Sector lending (PSL)

• Priority Sector lending (PSL): It means those sectors which the Government and RBI consider as important for the development of the basic needs of the country and are to be given priority over other sectors. The banks are mandated to encourage the growth of such sectors with adequate and timely credit.
• Under this, Commercial banks including foreign banks are required to mandatorily earmark 40% of the adjusted net bank credit for priority sector lending.
• Regional rural banks and small finance banks will have to allocate 75% of adjusted net bank credit to PSL.

Categories: a) Agriculture b) Micro, Small and Medium Enterprises c) Export Credit d) Education e) Housing f) Social Infrastructure g) Renewable Energy and h) Others