Priority sector lending in India: Revisiting the issue under new guidelines of RBI

Abstract

The banking sector plays a vital role in the development of the economy and the role of bank credit in economic development cannot be neglected. For removal of poverty and equitable distribution of income, various credit arrangements have been arranged by RBI off and on and one of them is Priority Sector Lending. In Priority Sector Lending, credit is given to those sectors which are creditworthy and contribute to the national product of an economy but not able to perform well due to lack of finance. Priority sector includes agriculture, MSMEs, educational loans, housing loans, export credit, social infrastructure, small business, and weaker sections of the society, etc. RBI issues various guidelines from time to time to do the financial inclusion in these sectors, in the same line, new guidelines have been issued by RBI on September 4, 2020. In the present study, we have discussed various changes that have been done in priority Sector lending as per the new guidelines. Major problems faced by the priority sector have also been discussed.