Govt brings more sectors under priority sector lending

Shishir Sinha | | Updated on: Dec 06, 2021


The Government has proposed to bring more sectors such as medium enterprises and renewable energy under priority sector lending by banks.

The Reserve Bank of Indian has set a target of 40 per cent of total available resources for credit under priority sector loans for public and private sector banks. Priority sector refers to those sectors of the economy which may not get timely and adequate credit in the absence of this special dispensation. Typically, these are small value loans to farmers for agriculture and allied activities, micro and small enterprises, poor people for housing, students for education and other low income groups and weaker sections.

“There is a need to increase employment, create basic infrastructure and improve competitiveness of the economy, thus creating more jobs. It is, therefore, time to re-orient the Priority Sector Lending Guidelines towards today’s growth and inclusion agenda,” a statement issued by the Finance Ministry said. Banks have provided over Rs 21.54 lakh crore under priority sector lending.

New proposal talks about enhancing credit to small and marginal farmers. Keeping this in mind a separate sub limit of up to 8 per cent is being introduced for the first time. Loans for agri-processing and agri-infrastructure would be included in such lending without any limit on the size of loans.

In order to encourage Micro, Small and Medium Enterprises (MSME), loans for Medium Enterprises will be part of PSL besides a separate sub limit will be for the micro enterprises. Loans up to Rs 5 crore for social infrastructure, like schools and health care facilities, drinking water facilities, sanitation facilities etc. are being included under new structure, for towns of less than 1 lakh population. Loans of up to Rs 10 crore in the renewable energy sector is also being added to the revised scheme.

The Ministry has also proposed introduction of Priority Sector Lending Certificate for banks. These will provide a market-driven incentive for efficiency and will enable banks to sell their surplus lending and thus earn a premium for their efficiency or geographical spread. It has also said that progress will be monitored quarterly and not at the end of the year.

Published on March 02, 2015
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