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Revised Priority Sector Lending (PSL) Guidelines

  • Posted By
    10Pointer
  • Categories
    Economy
  • Published
    8th Sep, 2020
  • Recently, the Reserve Bank of India (RBI) released revised Priority Sector Lending (PSL) guidelines.
  • It aligns with emerging national priorities and also bring sharper focus on inclusive development.
  • The PSL guidelines were last reviewed for commercial banks in April 2015 and for Urban Co-operative Banks (UCBs) in May 2018.
    • Additional Categories covered under to PSL are
    • Bank finance to start-ups up to Rs. 50 crore,
    • Loans to farmers for installation of solar power plants for solarisation of grid connected agriculture pumps.
    • Loans for setting up Compressed Biogas plants.
  • Revised Guidelines includes the following
    • Higher credit limit has been specified for Farmers Producers Organizations (FPOs) undertaking farming with assured marketing of their produce at a predetermined price.
    • It has defined farmers with land holding of up to one hectare as marginal farmers, and farmers with a landholding of more than one hectare and up to 2 hectares as small farmers.
    • The credit limits for renewable energy, health infrastructure, including the projects under ‘Ayushman Bharat’, have been doubled.
    • Higher weightage has been assigned to priority sector credit in ‘identified districts’ where priority sector credit flow is comparatively low.
  • The RBI mandates banks to lend a certain portion of their funds to specified sectors, like
    • Agriculture,
    • Micro, Small and Medium Enterprises (MSMEs),
    • Export credit,
    • Education,
    • Housing,
    • Social infrastructure,
    • Renewable energy.
  • All scheduled commercial banks and foreign banks (with a sizable presence in India) are mandated to set aside 40% of their Adjusted Net Bank Credit (ANDC) for lending to these sectors.
  • Regional rural banks, co-operative banks and small finance banks have to allocate 75% of ANDC to PSL.

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