Priority Sector Lending and Financial Inclusion
What priority sector lending (PSL) is, the categories it covers, how targets and shortfalls work through instruments like RIDF and PSL certificates, and the main financial-inclusion tools - no-frills accounts, the business correspondent model, and the JAM stack.
What you will be able to do
- Define priority sector lending and name its main categories.
- Explain how banks meet PSL targets and what happens on a shortfall.
- Describe priority sector lending certificates and their purpose.
- List the core instruments of financial inclusion in India.
What is inside this lesson
- 1What priority sector lending is
- 2The categories
- 3Meeting the target, and shortfalls
- 4Priority sector lending certificates
- 5Financial inclusion tools
- 6Common confusions
- 7Quick revision
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What priority sector lending is
Priority sector lending (PSL) is a policy requirement that banks direct a set share of their lending to parts of the economy that are important for national development but tend to be under-served by ordinary commercial credit.
The target is expressed as a percentage of a bank's Adjusted Net Bank Credit (ANBC) or the credit-equivalent of off-balance-sheet exposure, whichever is higher. There are also sub-targets for the weakest segments. The overall percentage and the sub-targets are set by the RBI and revised from time to time, so treat any specific figure as volatile.
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