In the context of priority sector lending (PSL) norms mandated by the Reserve Bank of India, how are commercial banks expected to support remote northeastern states like Arunachal Pradesh?

💡 Solution & Explanation

Priority sector lending guidelines require commercial banks to channel a specified percentage of their net bank credit to critical sectors such as agriculture, micro, small, and medium enterprises, and weaker sections, with special focus on credit-deficient areas like Arunachal Pradesh. This ensures that capital flows to socially vital economic segments that might otherwise be ignored by commercial lending algorithms. Monitoring PSL compliance helps bridge regional credit imbalances across India. Regional rural banks play a major role in fulfilling these mandated quotas.