Priority Sector Lending

Priority Sector Lending (PSL) refers to the mandatory requirement set by the Reserve Bank of India (RBI) directing banks to allocate a specific portion of their lending to certain key sectors of the economy. These sectors are vital for India’s inclusive development, financial empowerment, and social welfare, yet often struggle to secure adequate credit from traditional financial markets. Purpose of Priority Sector Lending Support weaker and underserved sections: Ensures that economically vulnerable groups have access to essential credit. Promote inclusive growth: Channels financial resources into sectors critical for the nation’s overall progress. Address market failures: Helps sectors that traditionally receive insufficient funding due to lack of collateral or perceived higher risk. Major Priority Sectors (as per RBI guidelines) Agriculture Micro, Small & Medium Enterprises (MSMEs) Education Loans Housing Renewable Energy Export Credit Social Infrastructure Weaker Sections of Society PSL Targets

1. Domestic Commercial Banks & Foreign Banks with 20+ branches Required to lend 40% of their Adjusted Net Bank Credit (ANBC) to priority sectors.
2. Small Finance Banks (SFBs) Must lend 75% of ANBC to priority sectors.
3. Regional Rural Banks (RRBs) Required to lend 75% of their total outstanding loans to priority sectors.

Strengthens rural development and agricultural productivity. Encourages growth of small businesses and entrepreneurship. Improves access to essential services like housing, education, and clean energy. Supports poverty reduction, improves livelihoods, and enhances economic stability.