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RBI alters priority sector norms
Why is it in news?
- The Reserve Bank of India released revised Priority Sector Lending (PSL) guidelines to augment funding to segments including start-ups and agriculture.
Fresh Categories:
- Following have been included as fresh categories eligible for finance under PSL:
(1) Bank finance of up to Rs. 50 crore to start-ups
(2) Loans to farmers both for installation of solar power plants for solarisation of grid-connected agriculture pumps and for setting up compressed biogas (CBG) plants.
Weightage Assignment:
- Higher weightage has been assigned to incremental priority sector credit in ‘identified districts’ where priority sector credit flow is comparatively low.
- The targets prescribed for ‘small and marginal farmers’ and ‘weaker sections’ are being increased in a phased manner.
- Higher credit limit has been specified for farmer producer organisations (FPOs)/farmers producers companies (FPCs) undertaking farming with assured marketing of their produce at a pre-determined price.
- Loan limits for renewable energy have been doubled.
Significance:
- The revision in PSL guidelines will incentivise credit flow to specific segments like clean energy, weaker sections, health infrastructure and credit deficient geographies.
About Priority Sector Lending (PSL):
- Priority sectors are those sectors which are considered as important for the development of the basic needs of the country.
- Following are considered Priority Sectors:
(1) Agriculture
(2) Micro, Small and Medium Enterprises
(3) Export Credit
(4) Education
(5) Housing
(6) Social Infrastructure
(7) Renewable Energy