The Reserve Bank of India (RBI) on 3 December 2015 announced revised Priority Sector Lending (PSL) norms for Regional Rural Banks (RRBs).
As per these new norms, the PSL target was increased to 75 percent of total outstanding from the existing 60 percent. The revised target will be effective from 1 January 2016.
The PSL norms have been revised considering the growing significance of RRBs in pursuit of financial inclusion agenda.
As on March 2015, there were 56 RRBs operating in the country with a network of 20059 branches. They cover 644 notified districts in 26 states and the Union Territory of Puducherry.
Key features of revised PSL Norms
Medium enterprises, social infrastructure and renewable energy were included under PSL category.
Agri-Loans
Loans to individual farmers, for the purpose of PSL, was increased to 50 lakh rupees from the present 10 lakh rupees against pledge/ hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months.
Aggregate limit loan was doubled to 2 crore rupees per borrower in the case of loans, among others, to corporate farmers, farmers’ producers organisations/ companies of individual farmers, farmers partnership firms/ co-operatives engaged in agriculture and allied activities.
Housing Loans
The RBI has lowered the quantum of loans that will qualify as PSL. Against the earlier limit of 25 lakh rupees, loans to individuals up to 20 lakh rupees only are considered as PSL as per revised guidelines. Housing loans to banks’ own employees will be excluded from this limit.
What is RRB?
- RRB – Regional Rural Banks are local level banking organizations operating in different States of India.
- They have been created to serve primarily the rural areas of India with basic banking and financial services. However, RRB’s may have branches set up for urban operations and their area of operation may include urban areas too.
- The area of operation of RRBs is limited to the area as notified by Government of India covering one or more districts in the State.
- RRB’s also perform a variety of different functions. RRB’s perform various functions in following heads
Providing banking facilities to rural and semi-urban areas. - Carrying out government operations like disbursement of wages of MGNREGA workers, distribution of pensions etc.
Providing Para-Banking facilities like locker facilities, debit and credit cards.
What is Priority Sector Lending?
- Priority Sector refers to those sectors of the economy which may not get timely and adequate credit in the absence of the special control by the government or central bank.
- Priority Sector Lending is an important role given by the Reserve Bank of India (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)
- Other low income groups and weaker sections
- This is essentially meant for an all round development of the economy as opposed to focusing only on the financial sector.
