Startups, farmers, others to now get easy loan from banks; RBI identifies these areas as priority sectors

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September 4, 2020 2:07 PM

Credit and Finance for MSMEs: RBI said that the revised PSL guidelines will enable better credit penetration to credit deficient areas and increase lending to small and marginal farmers and weaker sections.

Priority sector lending, Start ups, renewables limits, Reserve Bank of India, PSL guidelines, Bank of Baroda, kotak mahindra, renewable energyRBI’s new guidelines are expected to boost credit to renewable energy and health infrastructure.

Credit and Finance for MSMEs: The Reserve Bank of India today revised the guidelines for priority sector lending, after which loans to startups; farmers for installation of solar power; and setting up Compressed Bio-Gas (CBG) plants have been included as fresh categories eligible for finance. RBI said that the revised PSL guidelines will enable better credit penetration to credit deficient areas and increase lending to small and marginal farmers and weaker sections. It added that the move will also boost credit to renewable energy and health infrastructure. Under priority sector lending, startups of up to Rs 50 crore will get easy loans. 

In an effort to address regional disparities in the flow of priority sector credit, higher weightage has been assigned to incremental priority sector credit in ‘identified districts’ where priority sector credit flow is comparatively low. Also, the targets prescribed for small and marginal farmers and weaker sections are being gradually increased. The central bank highlighted that a higher credit limit has been specified for Farmers Producers Organisations (FPOs) and Farmers Producers Companies (FPCs) undertaking farming with assured marketing of their produce at a pre-determined price.

Also Read: 24 spokes of manufacturing chakra to make India a global tiger; cut imports, raise exports

While the loan limits for renewable energy have been doubled now, the credit limit for health infrastructure, including those under ‘Ayushman Bharat’,  has also been doubled to improve the country’s health infrastructure. The RBI has revised the guidelines in the wake of emerging national priorities and to bring a sharper focus on inclusive development, after having wide-ranging discussions with all stakeholders.

Meanwhile, the categories added in the priority sector lending is mandated by the RBI to the banks for providing a specified portion of the bank lending to few specific sectors like agriculture and allied activities, micro and small enterprises, poor people for housing, students for education, and other low-income groups. Such lendings help the country to grow holistically, instead of focusing only on the financial sector.

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