Priority Sector Lending: Priority sector lending is a crucial component of the banking system in India, holding significant relevance in the UPSC GS Paper 3 Syllabus, as well as various state PCS examinations and regulatory body examinations such as RBI and NABARD. Whether you are preparing for any of these competitive exams, understanding priority sector lending is essential. This article aims to highlight the key aspects of PSL that are important for various examinations, providing you with valuable insights and knowledge.
Priority sector lending by banks in India constitutes lending to
Categories | Domestic scheduled commercial banks and foreign banks with 20 branches and above | Foreign banks with less than 20 branches | Regional Rural Banks | Small Finance Banks |
Total Priority Sector | 40 percent of Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher. | 40 percent of Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher; out of which up to 32% can be in the form of lending to Exports and not less than 8% can be to any other priority sector | 75 percent of ANBC. However, lending to Medium Enterprises, Social Infrastructure, and Renewable Energy shall be reckoned for priority sector achievement only up to 15 percent of ANBC. | 75 percent of ANBC. |
Agriculture | 18 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher. Within the 18 percent target for agriculture, a target of 8 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher is prescribed for Small and Marginal Farmers. | Not applicable | 18 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher. | 18 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher. |
Micro Enterprises | 7.5 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher | Not applicable | 7.5 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher | 7.5 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher |
Advances to Weaker Sections | 12 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher | Not applicable | 15 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher | 12 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher |
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