As of my last knowledge update in September 2021, Priority Sector Lending (PSL) in India comes with specific targets and sub-targets that commercial banks, foreign banks, and regional rural banks are required to achieve. These targets and sub-targets are set by the Reserve Bank of India (RBI) to ensure that credit is directed towards priority sectors, which are critical for the country’s socio-economic development. Please note that these targets and sub-targets may be subject to change, so it’s essential to refer to the latest RBI guidelines for the most up-to-date information. Below are the details of the targets and sub-targets for Priority Sector Advances in India:
1. Overall Priority Sector Lending Target: As of September 2021, the overall PSL target for domestic commercial banks and foreign banks with 20 or more branches in India was 40% of their Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposure (CEOBE) (whichever is higher).
2. Categories Under Priority Sector Advances: Priority Sector Advances in India cover several categories, including:
a. Agriculture: Loans for farming activities, allied agriculture activities, and agro-processing. b. Micro, Small, and Medium Enterprises (MSMEs): Credit extended to micro, small, and medium-sized enterprises for their business needs. c. Export Credit: Loans provided to exporters to support their export activities. d. Education: Loans provided for educational purposes, including student loans for higher education. e. Housing: Loans extended for housing projects and individual housing needs. f. Renewable Energy: Loans for renewable energy projects like solar, wind, and biomass energy. g. Social Infrastructure: Financing for sectors such as health, drinking water, sanitation, and rural infrastructure. h. Weaker Sections: Credit facilities extended to individuals from weaker sections of society, including scheduled castes and scheduled tribes, for various economic activities.
3. Sub-Targets for Priority Sector Advances: Within the overall PSL target, there are sub-targets for some specific sectors to ensure focused lending. As of my last knowledge update, the sub-targets were as follows:
a. Agriculture: Within the overall PSL target, at least 18% was mandated to be allocated to agriculture. This sub-target ensures that a significant portion of credit goes to support agricultural activities, which form the backbone of the Indian economy.
b. Weaker Sections: Within the overall PSL target, at least 10% was required to be allocated to the weaker sections of society. This sub-target ensures that credit is provided to individuals from marginalized sections, enabling them to access formal credit facilities and participate in economic activities.
4. Regional Rural Banks (RRBs): Regional Rural Banks in India also have specific targets for Priority Sector Lending. As of my last knowledge update, the target for RRBs was 75% of their total outstanding advances.
5. Achievement and Reporting: Banks are required to monitor and report their progress in achieving the Priority Sector Lending targets and sub-targets to the RBI. Non-compliance with these targets may lead to penalties and other regulatory actions.
6. Revisions and Updates: The RBI periodically reviews the Priority Sector Lending guidelines and may make changes to the targets and sub-targets based on economic conditions and development priorities.
In conclusion, Priority Sector Lending in India plays a crucial role in promoting inclusive growth and equitable development. The RBI sets specific targets and sub-targets for different sectors to ensure that credit is directed to priority areas that contribute to the socio-economic development of the country. These targets and sub-targets aim to channelize adequate and timely credit to sectors that are traditionally underserved, thereby promoting financial inclusion and balanced economic growth.