Changes in priority sector lending (PSL)

Date: April 24, 2015

RBI Priority sector Jan Dhan Yojna

RBI revises priority sector norms, includes more categories

  Since the vision of Priority Sector Lending (PSL) first took shape, the structure of the Indian economy, the contribution by various sectors to GDP and the demographic profile has changed significantly. These emerging realities have also shaped the perception of national priorities.

The Reserve Bank has revised Priority Sector Lending norms with an aim to boost credit flow to farmers, small enterprises, exports, education and renewable energy. But the monitoring and penalty for failure to meet it could be more severe than in the past. 

prepare ias

According to the revised rules which have come into effect immediately, RBI has added new segments like medium enterprises, social infrastructure and renewable energy firms under the ambit of priority sectors. The RBI has said that overdraft facility under Pradhan Mantri Jan Dhan Yojna would also be considered as priority sector lending. 

All banks have to lend at least 40% of their net credit to the priority sector, and those foreign banks with less than 20 branches will reach the target by 2020. Distinction between direct and indirect lending to agriculture has been scrapped enabling more funds to flow to farm infrastructure such as warehouses, irrigation projects, and even cold storages.