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Priority Sector Lending - What is Priority Sector Lending?, Definition & Categories

  • What is Priority Sector Lending?

  • Understand the Priority Sector Lending in-details

  • Categories of the Priority Sector Lending

What is Priority Sector Lending?

Priority sector lending refers to the mandatory lending requirement imposed on banks by the Reserve Bank of India (RBI) to ensure that a certain portion of their lending is directed toward the priority sectors of the economy. The priority sectors are identified as those sectors that are crucial for the growth and development of the economy but may not have access to credit from traditional sources. 

 Understand the Priority Sector Lending in detail

Here is a glossary of key terms related to priority sector lending: 

1. Priority sector: 

The sectors identified by the RBI for priority sector lending include agriculture, micro, small, and medium enterprises (MSMEs), education, housing, and other specified weaker sections and segments of society that are crucial for the growth and development of the economy.


2. Priority sector lending targets: 

The percentage of total bank loans that must be directed towards priority sectors, as set by the RBI. Currently, the target for total priority sector lending is set at 40% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount, whichever is higher.


Categories of Priority Sector Lending

In broadly, priority sector lending can be categorized into the following sectors:

  • Priority Sector Lending for Agriculture

  • Priority Sector Lending for Weaker sections

  • Priority Sector Lending for MSMEs

  • Priority Sector Lending for Education

  • Priority Sector Lending for Non-performing assets


Other activities covered under priority sector lending

Other than the above, some other main categories also involve priority sector lending, such as education loans, microcredit, housing loans, Renewable Energy, Social infrastructure, etc.


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