CII Proposes Reforms in India's Priority Sector Lending Framework
CII Proposes Reforms in India's Priority Sector Lending Framework
The Confederation of Indian Industry (CII) has suggested changes to India's Priority Sector Lending (PSL) framework and called for more Development Finance Institutions (DFIs). PSL is a policy by the Reserve Bank of India (RBI) that ensures key sectors like agriculture, education, housing, and small industries receive necessary financial support. This policy helps in the socio-economic growth of underserved areas.
Despite its success, CII believes the PSL framework needs regular updates to stay relevant. For example, agriculture's contribution to GDP has decreased from over 30% to 14%, yet its PSL allocation remains at 18%. CII suggests reviewing the PSL framework every 3-4 years to align with emerging priorities and sectoral growth potential.
CII recommends expanding PSL to include sectors like green initiatives, digital infrastructure, and healthcare. This includes funding for green energy projects, electric vehicles, and climate-resilient agriculture. They also advocate for investments in digital technologies and healthcare innovation.
Additionally, CII highlights the importance of infrastructure and manufacturing in economic growth. They suggest setting up a high-level committee to revise PSL norms and explore the need for new DFIs. CII proposes a shift to Outcome-Based Metrics, focusing on measurable developmental outcomes rather than absolute lending targets.
Doubts Revealed
CII
CII stands for the Confederation of Indian Industry. It is an organization in India that works to create a good environment for businesses to grow and succeed.
Priority Sector Lending
Priority Sector Lending (PSL) is a policy in India where banks are required to lend a certain portion of their loans to specific sectors like agriculture, small businesses, and education, which are important for the country's development.
Green initiatives
Green initiatives are efforts to protect the environment and promote sustainability, like using renewable energy or reducing pollution.
Digital infrastructure
Digital infrastructure refers to the technology and systems that support digital communication and services, like the internet, data centers, and mobile networks.
Outcome-Based Metrics
Outcome-Based Metrics are ways to measure success by looking at the results or outcomes of actions, rather than just the actions themselves.
Development Finance Institutions
Development Finance Institutions (DFIs) are organizations that provide financial support for projects that help develop a country's economy, like building roads or schools.
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