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RBI alters priority sector norms to help startups, farmers avail loans

5th September, 2020 Economy

Context: India Assigns higher weightage to areas with low credit flow

More about news:

  • The Reserve Bank of India (RBI) on released revised priority sector lending guidelines to augment funding to segments including startups and agriculture.
  • Bank finance of up to ₹_50 crores to startups, 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.
  • Higher weightage has been assigned to incremental priority sector credit in ‘identified districts’ where priority sector credit flow is comparatively low.
  • The targets prescribed for ‘small and marginal farmers’ and ‘weaker sections’ are being increased in a phased manner and higher credit limit has been specified for farmer producer organizations (FPOs)/farmers producers companies (FPCs) undertaking farming with assured marketing of their produce at a predetermined price.
  • Besides, loan limits for renewable energy have been doubled. Commercial banks have been instructed to adhere to the revised guidelines.
  • “The RBI’s revision in PSL guidelines will incentivize credit flow to specific segments like clean energy, weaker sections, health infrastructure and credit deficient geographies,”

Priority Sector Lending

  • Priority Sector Lending is an important role given by the 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.