RBI released new guidelines on PSL

Reserve Bank of India has revised the Priority Sector Lending norms. As per the new guidelines, loans up to Rs. 50 Crore for startups in agriculture and MSME sector would be given under Priority Sector. This apart, the lending limit for health infrastructure has also been doubled to Rs. 10 crore.

What is Priority Sector Lending?

Priority Sector Lending means giving certain fraction of overall loans by a bank to certain vulnerable sectors as designated by RBI from time to time.

What are different broad sectors under Priority Sector Lending?

As of now RBI has divided all legible PSL sectors into eight broad categories. These are:

1. Agriculture
2. Micro, Small and Medium Enterprises
3. Export Credit
4. Education
5. Housing
6. Social Infrastructure
7. Renewable Energy
8. Other Sectors

What has changed now?

• New activities  eligible for finance under the priority sector now include:
  1. Bank finance of up to ₹50 crores to start-ups,
  2. Loans to farmers so as install solar power plants for solarisation of grid-connected agriculture pumps,
  3. Loans for setting the compressed biogas (CBG) plants
• High weightage has been assigned to incremental priority sector credit in ‘identified districts’ where priority sector credit flow is comparatively low.
• Agriculture specific targets has been revised:
  1. Targets prescribed for ‘small and marginal farmers’ and ‘weaker sections’ are being increased.
  2. High credit limit has been specified for farmer producer organizations (FPOs) or farmers producers’ companies (FPCs) undertaking farming with assured marketing of their produce at a pre-determined price.
• The loan limits for renewable energy have been doubled.
• Commercial banks have been instructed to adhere to the revised guidelines.

Significance

The recently released guidelines have tried to augment the funding to segments including start-ups and agriculture. As per revised guidelines, Bank finance of up to ₹50 crore to start-ups, loans to farmers both for installation of solar power plants for solarisation of grid-connected agriculture pumps, and for setting up compressed biogas (CBG) plants have been included as fresh categories eligible for finance under the priority sector.

Month: Current Affairs - September, 2020