Table of Contents
What is PSL?
- Priority Sector means those sectors which the Government of India and Reserve Bank of India consider as important for the development of the basic needs of the country and are to be given priority over other sectors.
Why the new guidelines?
- To align PSL with emerging national priorities and bring sharper focus on inclusive development.
Main aim
- 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.
New categories added?
- Bank finance to 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 Bio Gas (CBG) plants.
How the starved districts will be benefitted?
- In a bid to address regional disparities in the flow of priority sector credit,
- The RBI has decided to rank districts on the basis of per capita credit flow to the priority sector, and Build an incentive framework for districts with lower flow of credit and a disincentive framework for districts with higher flow of priority sector credit.
- As many as 184 districts with low per capita PSL credit flow will benefit from the RBI move.
- A higher credit flow to the rural sector is expected to boost rural spending at a time when GDP growth has contracted by 23.9% in the June quarter.
- The Priority Sector Lending (PSL) guidelines issued by Reserve Bank of India were last reviewed for Commercial Banks in April 2015 and for UCBs in May 2018.
- For this review, RBI took into account the recommendations made by the UK Sinha-led expert committee on MSMEs.
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