Economics • Banking & FinanceEasy
In the context of Indian banking, what does the term 'Priority Sector Lending (PSL)' entail?
A. Mandatory allocation of a specified percentage of bank credit to vulnerable sectors like agriculture, MSMEs, and weaker sections.✓ Correct Answer
B. Exclusive financial services provided to central government ministries and public sector undertakings.
C. Zero-interest loans extended exclusively to foreign institutional investors.
D. Subsidized lines of credit reserved for sovereign infrastructure projects.
💡 Solution & Explanation
Priority Sector Lending mandates scheduled commercial banks to allocate a specific percentage of their adjusted net bank credit to vital sectors like agriculture, micro enterprises, and weaker sections. Unlike sovereign infrastructure projects, these targets ensure credit availability to segments often excluded from formal banking channels. RBI monetary policy guidelines frequently examine PSL category definitions.
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