Priority Sector Lending.
♢ 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:
– 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 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