MCQ Test: Priority sector lending (PSL) - 1 - Assam Police Constable MCQ

Loans to individuals up to ₹3.5 million in metropolitan centres (with population of ten lakh and above) and loans up to ₹ 2.5 million in other centres for purchase/construction of a dwelling unit per family, are eligible to be considered as priority sector provided the overall cost of the dwelling unit in the metropolitan centre and at other centres does not exceed ₹ 4.5 million and ₹ 3 million, respectively. Housing loans to banks’ own employees are not eligible for classification under priority sector.

Money Laundering is the process through which black money is converted into white money i.e. legitimate money. Such funds are used for various anti-social activities such as terrorism etc. In order to prevent that, the PMLA Act was passed in the year 2002 and it has the authority to also seize property obtained from the illegal money.

The following borrowers are included under Weaker Sections under priority sector-
(a) Small and Marginal Farmers
(b) Scheduled Castes and Scheduled Tribes
(c) Distressed farmers indebted to non-institutional lenders
(d) Self Help Groups

NBFCs in India provide most of the banking services without meeting the legal requirements of a banking company. Such organizations are registered as per the provisions of the Companies Act 1956. NBFCs whose asset size is Rs 500 crores or more are mainly identified as the systemically important NBFCs in the country. These companies can function as per the mandate given to them.

Loans to individuals for educational purposes including vocational courses upto ₹ 1 million irrespective of the sanctioned amount are eligible for classification under priority sector.

Housing loans are considered as the priority sector loans upto certain limit in India. For metropolitan cities, housing loans upto Rs 35 lakhs are considered under the priority sector whereas loans upto Rs 25 lakhs are considered under the priority sector in other areas of the country. This classification holds true for the regional rural banks and small finance banks as well.

Bank loans up to a limit of ₹ 150 million to borrowers for purposes like solar based power generators, biomass based power generators, wind mills, micro-hydel plants and for non-conventional energy based public utilities viz. street lighting systems, and remote village electrification are eligible to be classified under priority sector loans under ‘Renewable Energy’. For individual households, the loan limit is ₹ 1 million per borrower.

Education is one of the priority sectors identified by the Reserve Bank of India. Under the PSL guidelines, loans upto Rs 10 lakhs to the individuals for educations purposes including the vocational courses to study in India and upto Rs 20 lakhs for studying abroad are identified under the priority sector by the Reserve Bank of India.

The activities covered under Agriculture are classified under three sub-categories viz. Farm credit, Agriculture infrastructure and Ancillary activities.

The banks have to give at least 40% of adjusted net bank credit in order to meet the PSL guidelines of the Reserve Bank of India. Within that quota, banks should give 18% to the agriculture sector, 7.5% to the micro, small and medium enterprises and 10 percent to the weaker sections of the society in order to fulfill the PSL quota. The calculation is done on the basis of the percentage of the adjusted net bank credit or credit equivalent of off-balance sheet exposure, whichever is higher.

RBI guidelines for PSL for scheduled commercial banks:

• 40% of the total net bank credit should go to a priority sector advances.
• 10% of the priority sector advances or 10% of the total net bank credit, whichever is higher should go to weaker section.
• 18% of the total net bank credit should go to agricultural advances. Within the 18 percent target for agriculture, a target of 8 per cent of Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher is prescribed for Small and Marginal Farmers, to be achieved in a phased manner.
• 5 of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher should go to Micro enterprises.

The Financial Inclusion Fund was established by RBI in 2016 after merging the earlier FIF and Financial Inclusion Technology Fund. The initial corpus of the fund was Rs 2000 crores and it is maintained by NABARD. The fund is administered by the Government of India. The main objective of this fund is to ensure financial inclusion in the country by creating awareness regarding the same.

The Reserve Bank of India has assigned priority sector lending (PSL) status to India’s startup sector.

Atal Pension Yojana is aimed at providing pension to the unorganized sector workers in the country. The minimum pension amount is Rs 1000 whereas the maximum amount is Rs 5000 in this scheme and monthly contribution will be based on the pension amount determined by the applicant. This scheme is applicable for citizens in the age group of 18-40 years only.

Priority Sector Lending Certificates (PSLCs) are a mechanism to enable banks to achieve the priority sector lending target and sub-targets by purchase of these instruments in the event of shortfall. This also incentivizes surplus banks as it allows them to sell their excess achievement over targets thereby enhancing lending to the categories under priority sector.

The PMJJBY scheme was launched by the government to provide life insurance cover to the citizens of the country. The sum assured is Rs 2 lakhs under this scheme whereas the annual premium amount comes to Rs 330. The scheme is for citizens within the age group of 18-50 years in India.

Priority Sector includes the following categories:

• Agriculture
• Micro, Small and Medium Enterprises (MSME)
• Export Credit
• Education
• Housing
• Social Infrastructure
• Renewable Energy

PMSBY was launched by the government to ensure that personal accident insurance cover is provided to the citizens. The premium under this scheme is only Rs 12 on yearly basis and the cover that can be obtained is for Rs 2 lakhs. The scheme is provided to the citizens within the age group of 18-70 years.

Priority Sector Lending means those sectors which the Government of India and Reserve Bank of India consider as important for the development of the basic needs of the country and are to be given priority over other sectors.

The PMJDY Scheme was launched in order to achieve financial inclusion in India in 2014. The main objective was to ensure that every family in the country has at least one bank account. Zero balance accounts can be opened under this scheme with any bank branch and also there is an overdraft facility of Rs 10000 to be given to the account holder. There is also a personal accident cover of Rs 2 lakhs along with the account, under this scheme.