Priority sector lending norms aim to provide institutional credit to sectors that have difficulty accessing credit, requiring scheduled commercial banks to lend 40% of their loans to priority sectors identified by RBI regulations, such as agriculture, micro, small and medium enterprises, weaker sections, education, housing, and others. The priority sectors and their targets have been modified over time by the RBI, most recently in 2015, with sub-targets set for small and marginal farmers, social infrastructure, renewable energy, and loans to weaker sections.
Priority sector lending norms aim to provide institutional credit to sectors that have difficulty accessing credit, requiring scheduled commercial banks to lend 40% of their loans to priority sectors identified by RBI regulations, such as agriculture, micro, small and medium enterprises, weaker sections, education, housing, and others. The priority sectors and their targets have been modified over time by the RBI, most recently in 2015, with sub-targets set for small and marginal farmers, social infrastructure, renewable energy, and loans to weaker sections.
Priority sector lending norms aim to provide institutional credit to sectors that have difficulty accessing credit, requiring scheduled commercial banks to lend 40% of their loans to priority sectors identified by RBI regulations, such as agriculture, micro, small and medium enterprises, weaker sections, education, housing, and others. The priority sectors and their targets have been modified over time by the RBI, most recently in 2015, with sub-targets set for small and marginal farmers, social infrastructure, renewable energy, and loans to weaker sections.
Priority sector lending norms aim to provide institutional credit to sectors that have difficulty accessing credit, requiring scheduled commercial banks to lend 40% of their loans to priority sectors identified by RBI regulations, such as agriculture, micro, small and medium enterprises, weaker sections, education, housing, and others. The priority sectors and their targets have been modified over time by the RBI, most recently in 2015, with sub-targets set for small and marginal farmers, social infrastructure, renewable energy, and loans to weaker sections.
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Priority sector lending (PSL)
NORMS Priority sector lending (PSL) Priority sector was first properly defined in 1972, after the National Credit Council emphasized that there should be a larger involvement of the commercial banks in the priority sector.
sectors and segments for whom it is difficult to get credit. According to priority sector norms, scheduled commercial banks have to give 40% of their loans (measured in terms of Adjusted Net Bank Credit or ANBC) to the identified priority sectors in accordance with the RBI regulations. Priority sector lending (PSL) The regulations are modified periodically by setting limits for subsectors and other qualifications for the beneficiary groups.
If these targets are not realized, banks have to
finance the development programmes implemented by the government for the concerned sectors. Categories under priority sector
The RBI has modified Priority Sector Lending norms after the recommendations of the Internal Working Group in 2015.
Agriculture 18%: Within the 18 percent target for agriculture, a
target of 8 percent of ANBC is prescribed for Small and Marginal Farmers.
Micro, Small and Medium Enterprises 7.5 percent.
Export Credit: Incremental export credit up to 2 percent for
domestic banks and foreign banks with 20 branches and above.
Education: Loans to individuals for educational purposes including
vocational courses upto Rs 10 lakh. Categories under priority sector Housing: Loans to individuals up to Rs 28 lakh in metropolitan centres (with population of ten lakh and above) and loans up to Rs 20 lakh in other centres for purchase/construction of a dwelling unit per family.
Social Infrastructure: Bank loans up to a limit of Rs 5 crore per borrower for
building social infrastructure for activities namely schools, health care facilities, drinking water facilities and sanitation facilities in Tier II to Tier VI centres.
Renewable Energy: Bank loans up to a limit of Rs 15 crore to borrowers
(individual households- Rs 10 lakh) including for public utilities viz. street lighting systems, and remote village electrification.
Others: SHG, JLG etc
Categories under priority sector
A subcategory called Weaker sections is also identified so
that they can get special preference under The new regulations stipulate that banks should give 10% of their loans to the weaker sections. Weaker sections include: Small Marginal Farmers, artisans, village and cottage industries with a credit limit upto Rs 1 lakh, beneficiaries of certain government sponsored schemes, SC/STs, SHGs, persons with disabilities, overdrafts upto Rs 5000 under PMJDY, distressed persons, individual women beneficiaries up to Rs 1 lakh Whether limits are prescribed for loans sanctioned to Micro, Small and Medium Enterprises to be classified as priority sector?
No limits are prescribed for bank loans sanctioned to
Micro, Small and Medium Enterprises engaged in the manufacture or production of goods under any industry specified in the first schedule to the Industries (Development and Regulation) Act, 1951 and as notified by the Government from time to time.
The manufacturing enterprises are defined in terms of
investment in plant and machinery under MSMED Act, 2006. Bank loans up to 5 crore per unit to Micro and Small Enterprises and 10 crore to Medium Enterprises engaged in providing or rendering of services and defined in terms of investment in equipment under MSMED Act, 2006 are eligible for classification under priority sector.
