Why in News?
The Reserve Bank of India (RBI) has introduced amendments to the Priority Sector Lending (PSL) guidelines to improve credit flow monitoring and strengthen financial inclusion
Priority Sector Lending (PSL)
Priority Sector Lending (PSL) is a regulatory framework mandated by the Reserve Bank of India (RBI) requiring banks to direct a specific portion of their credit to sectors that are essential for the country’s development but often lack adequate access to formal finance.
- It ensures that crucial sectors which often face credit shortages receive adequate financing.
- It is a key tool for achieving financial inclusion and balanced development.
PSL Sectors:
- Agriculture
- Micro, Small and Medium Enterprises (MSMEs)
- Export Credit
- Education
- Housing
- Social Infrastructure
- Renewable Energy
- Weaker Sections (included under “Others”)
PSL Targets:
Domestic Commercial Banks:
- Must allocate 40% of Adjusted Net Bank Credit (ANBC) to priority sectors.
Regional Rural Banks (RRBs) & Urban Cooperative Banks:
- Higher target of 75% of ANBC due to their role in rural and inclusive banking.
