Priority Sector and MSME
Priority Sector Lending (PSL) is a vital tool used by the Reserve Bank of India (RBI). It ensures that credit flows to sectors that are crucial for national development. These sectors often face difficulties in getting loans from traditional banks. The RBI mandates that all commercial banks must dedicate a portion of their lending to these specific areas.
Concepts (2)
ANBC is the total amount of money a bank has available for lending after making certain mandatory deductions. It includes the bank's total loans minus things like bills rediscounted with the RBI.
ANBC is the total amount of money a bank has available for lending after making certain mandatory deductions. It includes the bank's total loans minus things like bills rediscounted with the RBI. This figure is the base on which the 40% or 75% PSL target is calculated. For example, if a bank's ANBC is ₹100 crore, it must lend at least ₹40 crore to priority sectors. It is the most common measure used by the RBI to track lending targets.
PSLCs are tradable certificates that help banks meet their PSL targets. If a bank exceeds its target, it can sell the 'extra' credit as a certificate to a bank that failed to meet its target. This is done through the RBI's e-Kuber portal.
PSLCs are tradable certificates that help banks meet their PSL targets. If a bank exceeds its target, it can sell the 'extra' credit as a certificate to a bank that failed to meet its target. This is done through the RBI's e-Kuber portal. For example, if Bank A has reached 45% PSL, it can sell the 5% excess to Bank B. This ensures the overall system meets the target without forcing every single bank to find specific borrowers.
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Start Lesson: Adjusted Net Bank Credit (ANBC)