C.C.

S National Institute of Agricultural Marketing

Priority Sector Lending &

Doubling Farmer’s income

Presented by:
Mr. Yuvaraj H B
Mr. Anil Kumar
Ms. Shivangi Dumka
 Contents

 Introduction
 Categories
 Target and Sub Target Share
 Description of categories
 PSL Certificate
 Penalties
 Introduction
Priority Sector Lending is an important role given by the
(RBI) to the banks for providing a specified portion of the
bank lending to few specific sectors like agriculture and
allied activities, micro and small enterprises, poor people
for housing, students for education and other low-income
groups and weaker sections.
 The genesis of existing framework of PSL is from
1967
 National Credit Council meeting 1968
 Formulation of Priority sector lending took
place in 1972 by recommendation of Informal
Study group on Statistics. No targets imposed
 The targets for priority sector Lending made in
1974 of 33.3% of Total Lending and it should
completely adopted by March 1979
 RBI directed the banks to ensure the flow of 40%
of Net bank credit to priority sector by march
1985
Applicability

The provisions of these PSL apply to:

 every Scheduled Commercial Bank
 Regional Rural Banks (RRBs) and
 Small Finance Banks (SFBs)
Which are licensed to operate in India by the Reserve
Bank of India.
CATEGORIES AND TARGETS UNDER
PRIORITY SECTOR

 Agriculture
 Micro, Small and Medium
Enterprises
 Export Credit
 Education
 Housing
 Social Infrastructure
 Renewable Energy
 Others
 The targets and sub-targets for all scheduled commercial banks
operating in India:
Domestic scheduled commercial banks
Foreign banks with less than 20
Categories and foreign banks with 20 branches and
branches
above
Total Priority
Sector 40 per cent of Adjusted Net Bank Credit 40 percent
or Credit Equivalent Amount of Off-
Balance Sheet Exposure, whichever is
higher.
Agriculture 18 per cent Not applicable

Within the 18 per cent target for

agriculture, a target of 8 percent is
prescribed for Small and Marginal
Farmers.

Micro 7.5 per cent Not applicable

Enterprises

Advances to 10 percent Not applicable

Weaker
Sections
SOURCE:HTTPS://M.RBI.ORG.IN/SCRIPTS/FAQVIEW.ASPX?ID=87
 DESCRIPTION OF ELIGIBLE CATEGORIES
UNDER PRIORITY SECTOR

1.Agriculture:
Three sub-categories are-
a)Farm credit:
i)Loans to individual farmers & proprietorship firms of farmers,
directly engaged in Agriculture & allied activities
ii)Loans to corporate farmers, farmers’ producer
organizations/companies of individual farmers, partnership
firms and cooperative of farmers directly engaged in
agriculture and allied activities
iii) Loans to farmers up to ₹5 million against
pledge/hypothecation of agricultural produce (including
warehouse receipts) for a period not exceeding 12 months.
 Agriculture infrastructure:

I. Loans for construction of storage facilities

(warehouse, market yards, godowns and silos)
including cold storage units/cold storage chains
designed to store agriculture produce/products,
irrespective of their location.
II. Soil conservation and watershed development
III.Plant tissue culture and agri-biotechnology, seed
production, production of bio-pesticides, bio-
fertilizer, and vermi composting.

For the above loans, an aggregate sanctioned limit

of ₹1 billion per borrower from the banking system,
will apply.
Ancillary activities:

i.Loans up to ₹50 million to co-operative societies of

farmers for disposing of the produce of members
ii.Setting up of Agriclinics and Agribusiness Centres.
iii.Loans for Food and Agro-processing up to an aggregate
sanctioned limit of ₹1 billion per borrower
iv.Outstanding deposits under RIDF and other eligible
funds with NABARD on account of priority sector
shortfall.
 2. Micro, Small and Medium Enterprises (MSMEs):
Categorization and Limits for investment:

Categorization:

Manufacturing Sector

Enterprises Investment in plant and machinery

Micro
Does not exceed 25 lakh rupees
Enterprises
Small More than 25 lakh rupees but does not
Enterprises exceed 5 crore rupees
Medium More than 5 crore rupees but does not
Enterprises exceed 10 crore rupees

No limit is there for manufacturing sector

 Service Sector
Enterprises Investment in equipment
Micro
Does not exceed 10 lakh rupees
Enterprises
Small More than 10 lakh rupees but does
Enterprises not exceed 2 crore rupees
Medium More than 2 crore rupees but does not
Enterprises exceed 5 crore rupees

 Loans to Micro/ Small and Medium Enterprises (Services)

up to ₹5 crore and ₹10 crore, respectively is classified as
priority sector lending (PSL)
 3.Export Credit:

The Export Credit extended as per the details below will be

classified as priority sector.

Domestic banks Foreign banks with 20 Foreign banks with

branches and above less than 20 branches
Incremental export credit Incremental export Export credit will be
over corresponding date of credit over allowed up to 32 per
the preceding year, up to 2 corresponding date of cent of ANBC
per cent of ANBC effective the preceding year, up to
from April 1, 2015 subject 2 percent of ANBC
to a sanctioned limit of up to effective from April 1,
₹ 250 million per borrower 2017.
to units having turnover of
up to ₹ 1 billion
 4.Education
Loans to individuals for educational purposes including
vocational courses up to 10 million irrespective of the
sanctioned amount will be considered as eligible for priority
sector.

5.Renewable Energy:
1. Bank loans up to a limit of 150 million to borrowers for
purposes like solar based power generators, biomass-based
power generators, windmills
2. Non-conventional energy based public utilities viz. street
lighting systems, and remote village electrification.
3. For individual households, the loan limit will be 1
million per borrower
 6.Housing:
 
Loans to individuals up to 3.5 million in metropolitan centres
and loans up to 2.5 million in other centers
for purchase/construction of a dwelling unit per family
provided the overall cost of the dwelling unit in the
metropolitan centre and at other centers does not exceed 4.5
million and 3 million, respectively.
7.Social infrastructure
Bank loans up to a limit of 50 million per borrower for
building social infrastructure.

8.Others:
Loans not exceeding 50,000/- per borrower provided directly by
banks to individuals and their SHG/JLG, provided the individual
borrower’s household annual income in rural areas does not exceed
0.1 million and for non-rural areas it does not exceed 0.16 million
 Penalty for Banks

 Banks having any shortfall in lending to

priority sector shall be allocated amounts for
contribution to the Rural Infrastructure
Development Fund (RIDF) established with
NABARD and other Funds with
NABARD/NHB/SIDBI/ MUDRA Ltd.
 Priority Sector Lending Certificates (PSLCs)

are tradable certificates issued against priority sector loans of

banks so as to enable banks to achieve their specified target and
sub-targets for priority sector lending through purchase of these
instruments in the event of a shortfall and at the same time
incentivizing the surplus banks to lend more to these sectors

Priority sector certificates started in 2016 by RBI

 Sl.
Type of PSLCs Representing Counting for
No.
1. PSLC - Agriculture All eligible Agriculture loans except Achievement of agriculture target
loans to Small and marginal and overall PSL target
farmers (SF/MF) for which separate
certificates are available

2. PSLC - SF/MF All eligible loans to small/marginal Achievement of SF/MF sub-target,

 a farmers agriculture target and overall PSL
target

3. PSLC - Micro All eligible Loans to Micro Achievement of micro-enterprise

Enterprises Enterprises sub-target and overall PSL target

4. PSLC - General The residual priority sector loans Achievement of overall PSL target
i.e. other than loans to agriculture
and micro enterprises for which
separate certificates are available

SOURCE: http://www.arthapedia.in/index.php?title=Priority_Sector_Lending_Certificates_(PSLC)
 Present scenario of PSL

PSBs met target of 18% to agriculture

Almost half of the NPAs of PSBs are attributed to Priority

sectors

Banking sector failed to meet overall target to PSL

Private and foreign banks met targets only by 16.2% and 16.7%

Banks can achieve their 18% target to agriculture sector by

lending to indirect agriculture sectors
 References :

Master direction on Priority Sector Lending:

https://www.rbi.org.in/Scripts/NotificationUs
er.aspx?Id=10497&Mode=0