The industry body emphasised aligning PSL norms with sectoral contributions to GDP and fostering emerging sectors critical for long-term growth.
Priority Sector Lending, mandated by the Reserve Bank of India, ensures key areas like agriculture, education, housing, and small industries receive necessary credit. While this framework has been pivotal in equitable credit distribution, CII believes it requires periodic recalibration to reflect shifting economic dynamics.
In its pre-Budget submission, CII noted that agriculture’s contribution to GDP has declined from 30% in the 1990s to 14% today, yet its PSL allocation remains static at 18%.
“It’s time to realign allocations with GDP contributions and emerging sectoral growth. For instance, sectors like digital infrastructure, green initiatives, healthcare, and innovative manufacturing must gain focus under Priority Sector Lending,” said CII Director General Chandrajit Banerjee.
CII has proposed revising PSL norms every 3-4 years and expanding its scope to include sectors such as:
Green Initiatives: Renewable energy, electric vehicles, and climate-resilient agriculture.
Digital Infrastructure: Artificial intelligence, broadband networks, and advanced technologies.
Healthcare: Innovation and accessibility in medical services.
Additionally, the industry body highlighted the need for stronger support to infrastructure and advanced manufacturing, both of which hold significant potential to drive India’s growth story.
To support these sectors, CII recommended establishing a high-level committee to periodically review PSL norms and assess the need for new Development Finance Institutions beyond those like SIDBI and NABFID.
The organisation also advocated for transitioning to outcome-based metrics in credit distribution. This approach would shift the focus from lending targets to measurable developmental outcomes, ensuring tangible socio-economic impact from loans.
