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  • What is priority sector lending:
    1. Lending by a bank to certain sectors which are identified as "priority sector" by the RBI.
    2. Priority sectors are those which may not get timely and adequate credit in the financial system.
  • Categories under priority sector:
    1. Agriculture
    2. Micro, small and medium enterprises (MSME)
    3. Export credit
    4. Education
    5. Housing
    6. Social infrastructure
    7. Renewable energy
    8. Others
  • Targets /Sub-targets for priority sector:

CategoryPortion of Adjusted Net Bank Credit (ANBC) or credit equivalent amount of off-balance sheet exposure, (whichever is higher) allocation for PSL for and Portion of Adjusted Net Bank Credit (ANBC) or credit equivalent amount of off-balance sheet exposure, (whichever is higher) allocation for PSL for foreign banks with Total priority sector40%.
Foreign banks with 20 branches and more have to fulfill the target within 5 years (April 1, 2013 - March 31, 2018) 40% to be achieved in a phased manner by 2020.Agriculture18%.
Within this target of 18%, 8% is allocated to small and marginal farmers.
Foreign banks have to fulfill the target within five years (April 1, 2013 - March 31, 2018).NAMicro enterprises7.5%.The sub-target for micro enterprise for foreign banks would be made applicable post 2018.NAAdvances to weaker sections10%.
Foreign banks have to fulfill the target within five years (April 1, 2013 - March 31, 2018).NA

  • Target achievement for foreign banks having less than 20 branches in a phased manner as:

Financial yearThe Total Priority Sector as percentage ofANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher2015-1632%2016-1734%2017-1836%2018-1938%2019-2040%*This additional 2% year must be lent to sectors other than export.

  • Categories under "Agriculture": 
    1. Farm credit
    2. Agriculture infrastructure
    3. Ancillary activities
  • Small/marginal farmers:
    1. Marginal farmers - having land up to 1 hectare.
    2. Small farmers - having land of more than 1 hectare and up to 2 hectares.
  • Applicable limit and purpose for loans for renewable energy loans:
    1. Up to Rs. 15 crore to borrowers for purposes like solar based generators, biomass based power generators, wind-mill, micro-hydel plants and for non-conventional energy based public utilities viz. street lighting systems and remote village electrification.
    2. For individual households, the loan limit is Rs. 10 lakh per borrower.
  • Applicable limit and purpose for loans for social infrastructure loans:
    1. Up to Rs. 5 crore per borrower for building social infrastructure such as schools, health-care facilities, drinking water facilities and sanitation facilities in tier II to tier VI centers.
    2. Bank credit to Micro Finance Institutions (MFI) extended for on lending to individuals/ SHGs/ JLGs for water and sanitation facilities is also eligible for classification under PSL.
  • Loan limit for education: Rs. 10 lakh.
  • Loan limit for housing:
    1. Rs. 28 lakh in metropolitan centers (population >= 10 lakh) provided the overall house cost doesn't exceed Rs. 35 lakh.
    2. Rs. 20 lakh in other centers provided the overall house cost doesn't exceed Rs. 25 lakh.
    3. Housing loans to bank employees will not be considered under PSL.
  • Weaker sections under priority scetor:

No.Category1.Small and marginal farmers2.Artisans, village and cottage industries where individual credit limits don't exceed  Rs. 1 lakh3.Beneficiaries under National Rural Livelihoods Mission (NRLM), National Urban Livelihood Mission (NULM) and Self Employment Scheme for Rehabilitation of Manual Scavengers (SRMS) 4.SC/ST5.SHGs6.Beneficiaries of Differential Rate of Interest (DRI) scheme 7.Distressed farmers indebted to non-institutional lenders8.Distressed persons other than farmers, with loan amount not exceeding Rs. 1 lakh to prepay their debt to non-institutional lenders9.Individual women beneficiaries up to Rs. 1 lakh per borrower10.persons with disabilities11.Overdrafts upto Rs. 5,000 under PMJDY accounts, provided the borrower's household annual income does not exceed Rs. 1 lakh for rural areas and Rs. 1,60,000 for non-rural areas.12.Minority communities

  • Is bank credit to Micro Finance Institutions (MFI) treated as PSL: Yes, bank credit to MFIs extended for on-lending to individuals and members of SHGs/JLGs is eligible as PSL under these categories:
    1. Agriculture
    2. MSME
    3. Social infrastructure
    4. Others
  • Who decides rate of interest for loans under PSL: Department of Banking Regulation of RBI.

Sources:

  1. https://www.rbi.org.in/scripts/FAQView.aspx?Id=87
  2. http://www.iibf.org.in/documents/priority-sector-lending.pdf

See Also:

  1. Priority Sector Lending Certificates (PSLC)
  2. Adjusted Net Bank Credit (ANBC)
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