The Reserve Bank of India (RBI) recently released revised priority sector lending guidelines. It has been revised to augment funding to segments including start-ups and agriculture.
What has changed now?
New categories eligible for finance under the priority sector now include:
Bank finance of up to ₹50 crores to start-ups,
Loans to farmers so as install solar power plants for solarisation of grid-connected agriculture pumps,
Loans for setting the compressed biogas (CBG) plants
High weightage has been assigned to incremental priority sector credit in ‘identified districts’ where priority sector credit flow is comparatively low.
Agriculture specific targets has been revised:
Targets prescribed for ‘small and marginal farmers’ and ‘weaker sections’ are being increased.
High credit limit has been specified for farmer producer organizations (FPOs) or farmers producers’ companies (FPCs) undertaking farming with assured marketing of their produce at a pre-determined price.
The loan limits for renewable energy have been doubled.
Commercial banks have been instructed to adhere to the revised guidelines.
Significance
Revised PSL guidelines will incentivize credit flow to specific segments like clean energy, weaker sections, health infrastructure, and credit deficient geographies.
What is Priority Sector Lending?
These are the sectors which the Government of India and Reserve Bank of India consider as important for the development and are given priority over other sectors. The banks are mandated to encourage the growth of such sectors with adequate and timely credit. It includes Agriculture, Micro, Small and Medium Enterprises (MSME), Export Credit, Education, Housing, Social Infrastructure, Renewable Energy.
