Q. Consider the following statements regarding the “Priority Sector Lending (PSL)”:
1. All Indian banks have to follow the compulsory target of priority sector lending (PSL).
2. Indian and Foreign Banks need to lend 40 per cent to the priority sector every year of their total lending.
Which of the statements given above is/are correct?

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: A
Notes:

All Indian banks have to follow the compulsory target of priority sector lending (PSL).  

The priority sector in India are at present the sectors-agriculture, small and medium enterprises (SMEs), road and water transport, retail trade, small business, small housing loans (not more than Rs. 10lakhs), software industries, self help groups (SHGs), agro-processing, small and marginal farmers, artisans, distressed urban poor and indebted non-institutional debtors besides the SCs, STs and other weaker sections of society.  

The PSL target must be met by the banks operating in India in the following way:  

  • Indian Banks need to lend 40 per cent to the priority sector every year (public sector as well as private sector banks, both) of their total lending.  
  • Foreign Banks (having less than 20 branches) have to fulfill only 32 per cent PSL target which has sub-targets for the exports (12 per cent) and small and medium enterprises (10 per cent). 

Source: TMH Ramesh Singh 

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