The document discusses India's priority sector lending scheme, which requires banks to allocate a portion of their lending to important sectors like agriculture, small businesses, and renewable energy. It was first introduced in 1974 to ensure timely credit to priority sectors. Recent reforms broadened the sectors to include medium enterprises and social infrastructure. The expected advantages of the scheme include increased rural industries and living standards, poverty eradication, and infrastructure and GDP growth. Studies found the scheme increased incomes, employment, and achieved goals like poverty reduction and self-employment opportunities. In conclusion, the overall impact is positive as banks now provide credit to boost the rural economy and energy sector.

1. ADVANTAGES OF
PRIORITY SECTOR
LENDING
GROUP 5

2. INTRODUCTION
• Priority sector lending scheme is a policy of providing a
specified portion of bank lending to the important sectors of
the economy.
• It includes agriculture, small-scale industries, cottage sector,
tiny sector, export sector, and other small business (service)
firms.
• The Reserve Bank of India was first to initiate priority
sector lending scheme in India.
• The main purpose of this scheme was to see that timely and
sufficient credits (loans) are given (provided) to the priority
sector.
• Previously, only public sector banks were asked to give
loans to this sector. However, now even private and foreign
banks have to give loans to this sector.

3. BRIEF BACKGROUND
 The PSL program has been implemented by the
RBI since 1974, when banks were advised to raise
credit to priority sectors to the level of 33.3% by
March 1979.
 Today this number stands at 40%, out of which
direct agriculture lending has to be 18%.

4. RECENT REFORMS
 Broad basing the priority sector, RBI added three
more categories into the fold: Medium enterprises,
Social infrastructure Renewable energy.
 Micro enterprises and small and marginal farmers
will have to be given at least 8% of the loans
extended by banks.
 Foreign banks with less than 20 branches given time
till the end of fiscal year 2020 to complete PSL
target.

6. EXPECTED ADVANTAGES PRIORITY
SECTOR LENDING
 Increase in Industries and allied activities at grass
root level.
 Improved living standards of rural people.
 Poverty eradication.
 Development of infrastructure in rural areas
 Increase in production of agriculture and allied
goods
 Support to gross domestic product.

7. Impact on Income
• The average pre-loan income in the agriculture sector was Rs.
833 and in the post-loan period it has increased to Rs. 3,458.
• In the SSI sector it has increased from Rs. 656 to Rs. 3,944.
• In Government-sponsored programmes the average income
has improved from Rs. 500 to 2,062 .
• In other tertiary sectors, the increase was from Rs. 1,180 to
Rs. 4,413.
• On the whole the average pre-loan income was Rs. 760 and in
the post-loan period it was Rs. 3,212.

8. Impact on Employment
• In the agriculture sector, the man Labour has
recorded an increase of 91 per cent, woman 166 per
cent
• The average employment level has increased from
162 to 347 person days from pre-loan to post-loan
period,recording 114 per cent increase.
• In the small-scale industries sector, the man Labour
has registered an increase of 447 per cent and that of
woman to 484 per cent .
• The skilled man Labour has increased to 343 per cent
and that of woman to 289 per cent.

9. GOALS ACHIEVED THROUGH PSL
 Eradication of poverty is achieved through the
implementation of PSL programme.
 Through the concept of PSL, upliftment of weaker
sections is made Possible.
 Providing new opportunities for productive and
gainful self-employment to the educated
unemployed youth is one of the major aims of PSL
programme.
 Reduction of unemployment is one of the major
goals achieved through PSL.
 Due to agriculture financing the goal of self-
sufficiency in food is achieved.

10. CONCLUSION
 Overall impact of priority sector lending
scheme is positive.
 Banks are now deploying credit in desired
direction and providing an impetus to the
rural economy.
 With new reforms even energy sector of
India will get a boost.

11. Thank you
For lending your Ear