From UPSC perspective, the following things are important :
Prelims level: Priority Sector Lending (PSL)
Why in the News?
The RBI has issued revised guidelines for Priority Sector Lending (PSL), effective from April 1, 2025, to improve the targeting of bank credit to key sectors of the economy.
About Priority Sector Lending (PSL)
| What is it? |
Origin of PSL:
|
| Which Banks are Covered Under PSL? | 1. Domestic Scheduled Commercial Banks, Cooperative Banks, and Foreign Banks: 40% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposure (CEOBSE), whichever is higher.
2. Small Finance Banks and Regional Rural Banks (RRBs): 75% of ANBC or CEOBSE, whichever is higher. 3. Payment Banks: NOT subject to PSL targets. |
| Priority Sector Categories | • Agriculture • Micro, Small, and Medium Enterprises (MSMEs) • Export Credit • Education • Housing • Social Infrastructure • Renewable Energy
• Others, including Scheduled Castes, Scheduled Tribes, and Persons with Disabilities. • Micro Finance Institutions (MFIs) offering loans to individuals and Self-Help Groups (SHGs) are also eligible for PSL classification. |
| Consequences of Failing to Meet PSL Norms | 1. Investment in Rural Infrastructure Development Fund (RIDF): Banks falling short of PSL targets may be required to invest in the Rural Infrastructure Development Fund (RIDF), managed by NABARD, or other designated funds like those managed by SIDBI and NHB.
2. Purchase of PSL Certificates: Banks can purchase Priority Sector Lending Certificates (PSLCs) to meet their PSL targets. |
| Priority Sector Lending Certificates (PSLCs) |
|
Revised PSL Guidelines for 2025:
- Revised PSL guidelines for 2025 will enhance the targeting of bank credit to priority sectors.
- Loan limits for housing have been increased, with differentiated limits based on population size: ₹50 lakh (population ≥ 50 lakh), ₹45 lakh (population 10-50 lakh), and ₹35 lakh (population < 10 lakh).
- Renewable energy loans: Up to ₹35 crore for power generators and public utilities, and ₹10 lakh for individual households.
- Urban Cooperative Banks (UCBs) have a revised PSL target of 60% of Adjusted Net Bank Credit (ANBC).
- Weaker Section borrowers expanded and the cap on loans to individual women beneficiaries has been removed.
| [UPSC 2012] The basic aim of Lead Bank Scheme is that the –
(a) big banks should try to open offices in each district (b) there should be stiff competition among the various nationalized banks (c) individual banks should adopt particular districts for intensive development (d) all the banks should make intensive efforts to mobilize deposits |
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