Priority Sector Lending: PSL in India.

Priority Sector Lending.

Priority Sector Lending_wiki

All banks in India have to follow the compulsory target of PSL.

♢ Priority Sectors are those sectors which might not get timely credit if such provisions are not in place.

♢ Currently Priority Sector Lending includes:

– Agriculture

– SMEs (Small & Medium Enterprises)

– Small Housing Loans

– SHGs (Self-Help Groups)

– weaker sections

– Renewable Energy  (added in PSL in 2015) , etc.

PSL for Indian Banks:

Indian banks (public as well as private sector banks) compulsorily need to lend 4o% of their total lending.

Of this 40%, 18% is fixed for agriculture (called sub-targets of PSL).

Foreign Banks:

Foreign banks operating in India have the target of 32% PSL with sub-targets as well. Like 12% for exports, 10% for SMEs, etc.

## Reforms in PSL:

The committee on financial system  (CFS), 1991 suggested:

1. Reduce PSL to 10% for all banks immediately & to do away with policy of PSL over time.

2. PSL sectors should be reshuffled every 3 years.

With Great Love,

Er. Amit Yadav


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