PSL (PSL Full Form) Importance In Banks In India

PSL Full Form

PSL Full form is Priority sector lending (PSL) PSL is all about providing requirements regularized by the RBI and providing a minimum portion of their loans to various sectors, like sectors of development and sectors that have difficulty getting loans. The main motive of PSl is to provide dedicated funds for the welfare of society in this area, like agriculture and allied activities, education and housing, and food for the poorer population.

PSL full form norms are updated by the RBI at regular intervals and set the limit as per the sectors. These norms are also changed in the context of a pandemic. As we grow economically, the sectors covered in PSL are extended. In PSL norms, the extended sector is startups, and the limits are increased for renewable energy, solar power, and compressed biogas plants.

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PSL norms: updation and extension

In October 2022, the RBI will review the PSL norms. In PSL norms, there are a few changes made to the recommendations of the committees, like ‘The Expert Committee on Micro, Small, and Medium Enterprises and The ‘Internal Working Group to Review Agriculture Credit, with discussions with all the stakeholders.

In PSL full form in banking, this norm has undergone several changes in recent years. These changes include new categories:

  • MSMEs,
  • social infrastructure
  • renewable energy

There is a separate target for small and marginal farmers; the target should be increased by 2024 to 10%. For microenterprises, the target is 7.5%, and for weaker sections, the target is 10% in 2021, which will be increased by 12% by 2024.

In PSL, if the categorized banks overreached their spending loan targets and banks need additional sectors for their priority sectors, They can issue PSL Certificates. This PSL certificate helps the banks extend the amount for that specific sector. These PSL certificates can be seen on the e-Kuber platform of the RBI’s website.

Weaker sector norms under the PSL

In PSL full form, there is a weaker sector as per the RBI regulations. In this weaker sector, there are different department list below :

  • small and marginal farmers
  • artisans, village, and cottage industries whose credit limits do not exceed Rs. 1 lakh
  • some beneficiaries under government schemes such as the National Rural Livelihoods Mission, the National Urban Livelihood Mission
  • the Self Employment Scheme for Rehabilitation of Manual Scavengers,Individual female beneficiaries up to Rs. 1 lakh per borrower
  • handicapped persons
  • minority communities.

In PSL, there is a shortfall and remedies measures in Banks. In PSL, having a shortfall in lending to priority sectors and subsectors, stipulated targets are required. These targets help contribute to the funds of the Rural Infrastructure Development Fund, the National Bank of Agriculture and Rural Development, the Small Industries Development Bank of India, and the National Housing Bank.

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Conclusion

PSL full form in banking is about fulfilling the target by providing loans to the categorized sectors through banks.  In PSL, there are lots of sectors that provide funds for the welfare of the economy as per the RBI guidelines. The percentage of funds for these sectors varies as per the RBI regulations. The RBI has reviewed the PSL norms for lending funds in recent years.The RBI updated and extended the sectors and their fund limits as per the needs of those sectors.

In PSL, there are various banks that provide credit as per the targets mentioned in the PSL norms by the RBI. In PSL Commercial Banks, Primary Cooperative Banks are the banks that provide credit to different sectors. In PSL,various sectors are the priority sector and the weaker sector. Under the priority sector, the percentage of funds is defined to provide credit to the banks. In PSL departments that cover the sector of agriculture :

  • Farm credit to individual farmers
  • Farm credit to corporate farmers
  • cooperative farmers engaged in agriculture
  • allied activities
  • Agricultural Infrastructure
  • Ancillary services
  • loans to startups, and many more.

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