Why in News ?
The Reserve Bank of India released revised priority sector lending (PSL) guidelines to augment funding for COVID-19 impacted companies.
Revised Priority Sector Lending Guidelines
- To align them with emerging national priorities and bring sharper focus on inclusive development, funding for COVID-19 impacted companies.
- Who will be targeted ?
- Small and marginal farmers and weaker sections
- Boost credit to renewable energy
- Health infrastructure
- Fresh categories eligible for finance under the priority sector
- Bank finance for start-ups
- Loans to farmers for installation of solar power plants for solarisation of grid connected agriculture pumps
- Loans for setting up Compressed Bio Gas (CBG) plants.
- Higher weightage to incremental priority sector credit in identified districts where priority sector credit flow is comparatively low.
- Raised the start-up funding limit to Rs. 50 crore.
- Loan limits doubled for renewable energy and health infrastructure.
What is priority sector lending ?
Providing a specified share of the bank lending to few specific sectors identified which need attention and support. This will relaxes the lending norms for poor and small businesses.
All scheduled commercial banks and foreign banks are mandated to set aside 40% of their Adjusted Net Bank Credit (ANDC) for lending to these sectors.
Priority Sector includes the following categories :
- Agriculture
- Micro, Small and Medium Enterprises
- Export Credit
- Education
- Housing
- Social Infrastructure
- Renewable Energy
- Others
Hurdles in PSL
- Some of the States are getting much higher share, as high as 10 per cent of total agricultural credit compared to other States getting as low as 0.5 per cent.
- The 8 per cent sub-target for small and marginal farmers too has not been well covered.
Source : Business Lines
Topic
Prelims : Priority Sector Lending
GS III : Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment
Current Affairs Compilation : 10 September 2020