What is Priority Sector Lending?

As per the guidelines of the Reserve Bank of India (RBI), the definition of Priority Sector Lending requires banks to allocate a certain amount of lending money to priority sectors of the economy. 

The priority sectors are defined as those that are crucial for the country's economic development and growth, but lack access to credit funds from traditional sources. 

Understanding the Terms in Detail

Here is the detailed explanation of the terms used in the priority sector lending:

1. Priority sector: The sectors that are identified for the priority sectors lending by RBI include agriculture, housing, education, micro, small, and medium enterprises (MSMEs), etc. It also includes many other weaker sections/segments of society, which are very crucial for the development and growth of the economy. 

2. Priority Sector Lending targets: It includes the percentage of the total loans provided by banks for the priority sector lending as per the RBI. The target for the total priority sector lending is set at 40% of the Credit Equivalent Amount or Adjusted Net Bank Credit, whichever is higher in amount. 

Categories of the Priority Sector Lending

The priority lending sector can be broadly categorized into the following sectors:

• Priority Sector Lending for Education
• Priority Sector Lending for Agriculture
• Priority Sector Lending for Weaker Sections
• Priority Sector Lending for MSMEs
• Priority Sector Lending for Non-Performing Assets

Apart from the categories mentioned above, there are several main categories, including priority sector lending. These are microcedit, education loans, housing loans, renewable energy, social infrastructure, etc.