UPSC Prelims 2013 · Question 26 of 99

UPSC Prelims 2013 question on Priority Sector Lending

Priority Sector Lending by banks in India constitutes the lending to:

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Answer: D. All of the above

Correct Answer: All of the above

According to the official UPSC Answer Key for Prelims 2013, the correct option is all of the above.

Priority Sector Lending is an RBI-mandated requirement to ensure bank credit reaches sectors important for inclusive and balanced development.

1. Agriculture — Correct

Agriculture is a major category under Priority Sector Lending.

It includes farm credit, agricultural infrastructure and allied activities.

2. Micro, Small and Medium Enterprises — Correct

MSMEs are included under Priority Sector Lending.

This ensures credit support to small industries, artisans and enterprises that may not easily get formal finance.

3. Weaker sections — Correct

Weaker sections are also covered under Priority Sector Lending.

This includes small and marginal farmers, artisans, SCs/STs, distressed farmers and women beneficiaries.

* Scheduled commercial banks generally have to lend 40% of Adjusted Net Bank Credit to priority sectors.

* Regional Rural Banks and Small Finance Banks have a higher PSL target.

* Other PSL categories include education, housing, export credit, social infrastructure and renewable energy.

* Priority Sector Lending Certificates allow banks with surplus PSL lending to sell certificates to banks with shortfall.

* If banks fail to meet PSL targets, the shortfall may be allocated to funds such as the Rural Infrastructure Development Fund.

* NABARD plays an important role in rural credit and rural infrastructure financing.

Agriculture, MSMEs and weaker sections are all included under Priority Sector Lending, so the correct answer is all of the above.

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