Budget 2025: Why Nirmala Sitharaman needs to revamp priority sector lending and how it can drive growth
Nirmala Sitharaman prepares to present the Union Budget for 2025 in February, the Confederation of Indian Industry (CII) has put forward a compelling case for reenergising India’s Priority Sector Lending (PSL) framework.
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With the nation aiming to achieve its vision of Viksit Bharat 2047, PSL allocations may be key in the evolving priorities of a rapidly changing economy.
While big segments of economy agriculture, MSMEs and other elements of India Inc do benefit from the framework, a study by the Reserve Bank of India (RBI) has shown that PSL helps in improving overall asset quality of banks too.
Sitharaman’s Budget 2025 offers an opportunity to address these concerns by fostering innovation and sustainability through targeted financial interventions.
What is priority sector lending
Introduced by the Reserve Bank of India (RBI), the PSL policy mandates banks to allocate a certain proportion of their loans to critical sectors such as agriculture, education, housing, and small industries, ensuring equitable credit distribution.
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