Priority Sector Lending

Priority Sector Lending: Priority Sector Lending (PSL) is a way of giving higher priority to certain economic sectors of the country. The purpose of a priority sector loan is to provide institutional credit to sectors and segments for which obtaining credit is difficult.

Priority Sector Lending

1. Agriculture
2. Micro, Small and Medium Enterprises (MSME)
3. Export Credit
4. Education
5. Housing
6. Social Infrastructure
7. Renewable energy

History of Priority Sector Lending

• The origins of primary sector credit can be traced back to 1966, when Morarji Desai saw the need to increase credit to agriculture and small-scale industries.
• However, the definition of the primary sector was formalized based on a report by the Reserve Bank of India (RBI) to the National Credit Council in 1972.
• In 1974, commercial banks were targeted at 33.33% of their ANBC, which Dr. K.S. got 404 to ANBC. Krishnaswamy Committee.
• After the nationalization of the banks, the formation of the primary sector also allowed the then prime minister of India, Indira Gandhi, to satisfy important political interests.
• The definition of priority sectors grew over time and was not limited to important pressure groups, but was expanded to include important neglected sectors of the economy.
• Despite the changes, the classification remains strongly focused on agriculture and small-scale industries (defined as micro, small and medium enterprises or MSMEs) to this day.

Activities Covered Under Priority Sector Lending

1. Agriculture: Loans for agricultural activities including cultivation, breeding, fishing and other agricultural activities. Micro, Small and Medium Enterprises (MSME): Credit is given to micro, small and medium enterprises. This includes loans for new business start-ups, working capital requirements and expansion.
2. Education: Loans made to cover educational expenses, including tuition fees, purchase of books, course fees and other educational purposes.
3. Housing: loans to finance housing, including loans for the purchase, construction or renovation of residential buildings.
4. Export credit: Financing provided to exporters to facilitate international trade. This includes pre-shipment and post-shipment credit, export working capital and other export-related financial services.
5. Renewable Energy: Loans for renewable energy projects such as solar, wind, biomass and other clean energy projects.
6. Health care: credit support for the development of health infrastructure, including financing of hospitals, clinics, medical equipment and health services.
7. Social Infrastructure: Funding for social infrastructure projects such as schools, colleges, vocational training centers and other community development projects.
8. Loans to the weakest groups: Special attention is given to marginalized and economically weaker groups. This includes Scheduled Castes, Scheduled Tribes and Other Backward Classes.

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