Revised Priority Sector Lending To Include Start-Ups

Mumbai, Aug 6: The Reserve Bank of India (RBI) on Thursday decided to broaden the scope of Priority Sector Lending (PSL) by including start-ups and enhancing borrowing limits for renewable energy sectors.

The central bank 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 under the PSL. Banks are required to assign 40 per cent 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 the central bank in April 2015.

"To align the guidelines with emerging national priorities and bring a sharper focus on inclusive development, the guidelines have been reviewed after wide-ranging consultations with all stakeholders," the RBI said.

The revised guidelines also aim to encourage and support environment-friendly lending policies to help achieve Sustainable Development Goals (SDGs).

The new scope will include start-ups and increase the limits for renewable energy, including solar power and compressed biogas plants; and, also increase the targets for lending to 'Small and Marginal Farmers' and 'Weaker Sections', the central bank said.

To address the regional disparities in the flow of priority sector credit, an incentive framework has already been put in place for banks.

While 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.