The Reserve Bank of India on Thursday decided to widen the scope of Priority Sector Lending (PSL) by including startups and enhancing borrowing limits for renewable energy sectors.
PSL is essentially lending by a commercial bank for certain sectors which are identified as “priority sectors” by the central bank of India, which is, RBI.
Furthermore, RBI would also increase the targets for lending to “small and marginal farmers” and “weaker sections” under the PSL.
The eligible entities get access to credit on easier terms from banks within the PSL. Banks are required to assign 40% of Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher to the priority sector, including agriculture and micro-enterprises, it said.
The PSL guidelines were last reviewed by RBI in April of 2015.
The revised guidelines also aim to encourage and support environment-friendly lending policies to help achieve Sustainable Development Goals (SDGs). This approach seems to be very inclined towards climate change and all the initiatives that coincide with social and public interests.
The scope of the revised PSL has been very comprehensive in the sense that it has decided to include “startups; increasing the limits of renewable energy, including solar power and compressed gas plants; and, increasing the targets for lending to small, marginal farmers and weaker sections”, RBI added.
To address the regional disparities in the flow of priority sector credit, an incentive framework has already been put in place for banks.
Meanwhile, the higher weight would be assigned for incremental priority sector credit in the identified districts where credit flow is comparatively lower, a lower weight would be assigned to incremental priority sector credit in identified districts where the credit flow is comparatively higher.