CII seeks reforms in India's priority sector lending framework
Arguing that current Development Finance Institutions (DFIs) like SIDBI and NaBFID (National Bank for Financing Infrastructure and Development) have their roles cut out as they have earmarked sectors to finance, the chamber also suggested setting up of a high level committee to look at the revision of PSL norms and explore the need for any new DFIs to cater to some of the new and emerging sectors.
Priority Sector Lending is a policy tool aimed at ensuring that key sectors crucial to the nation's development receive adequate financial support. Mandated by the Reserve Bank of India (RBI), PSL obligates banks to allocate a specified proportion of their loans to sectors such as agriculture, education, housing, and small industries.
The framework ensures equitable credit distribution, contributing to the socio-economic growth of underserved areas.
Despite its massive success, the PSL framework requires regular recalibration to remain relevant. This recalibration is essential to ensure that the financial resources are optimally distributed, in harmony with our vision of Viksit Bharat 2047, CII stated.
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