Previous Year Question

Priority Sector Lending is intended to ensure the flow of institutional credit to sectors and social groups that may not receive adequate and timely credit under ordinary commercial lending conditions.

RBI prescribes overall targets and sub-targets for lending by banks to the priority sector.

Option (a), agriculture, is correct. Agriculture is a major priority-sector category. It includes crop loans to farmers and medium- and long-term loans for agriculture and allied activities. Eligible lending for agriculture infrastructure and ancillary activities may also be classified under this category.

Option (b), micro and small enterprises, is correct. Eligible bank credit to micro, small and medium enterprises is included under Priority Sector Lending. The micro and small enterprises mentioned in the question are, therefore, covered by the PSL framework.

A separate sub-target is prescribed for micro enterprises so that the smallest businesses are not neglected within total MSME lending.

Option (c), weaker sections, is correct. RBI prescribes a separate lending sub-target for eligible weaker sections. Subject to the applicable conditions, this category may include borrowers such as:

• Small and marginal farmers

• Landless agricultural labourers, tenant farmers and sharecroppers

• Eligible members of Scheduled Castes and Scheduled Tribes

• Self-Help Groups

• Distressed farmers and other specified vulnerable groups

Priority Sector Lending is not restricted to agriculture. The regulatory framework also covers other categories such as MSMEs, export credit, education, housing, social infrastructure and renewable energy. Nevertheless, each of the three options given in the question is independently correct.