New Delhi, Dec 22: The Confederation of Indian Industry (CII) has proposed significant reforms to India’s Priority Sector Lending (PSL) framework, recommending the inclusion of emerging and high-growth sectors such as green initiatives and digital infrastructure.
This shift is aimed at aligning PSL with the country’s long-term development goals and evolving economic priorities.
The industry body has also advocated for the establishment of a high-level committee to review PSL norms and the creation of additional Development Finance Institutions (DFIs) to support emerging sectors.
PSL is a crucial policy tool in India, designed to ensure that key sectors critical to the nation's development receive adequate financial support. Mandated by the Reserve Bank of India (RBI), PSL requires banks to allocate a certain proportion of their loans to sectors like agriculture, education, housing, and small industries. The framework helps promote equitable credit distribution, contributing to the socioeconomic development of underserved areas.
However, despite its success, CII argues that the PSL framework needs regular updates to stay relevant. This recalibration is essential to ensure that financial resources are effectively allocated, in line with the vision of Viksit Bharat 2047. For example, while agriculture now contributes only 14 percent of the GDP, its PSL allocation remains at 18 percent, a level set when agriculture's GDP share exceeded 30 percent. In contrast, sectors like infrastructure and innovative manufacturing are underrepresented in PSL, despite their significant potential to drive economic growth.
As India's economy has evolved rapidly in recent decades, the focus of employment has shifted towards newer sectors, driven by higher education levels and increased disposable incomes across the population.
