Start-ups to get priority sector tag as RBI revises lending norms

The Reserve Bank of India (RBI) is revising the Priority Sector Lending (PSL) norms to enable higher lending to start-ups and renewable energy firms, as well as to correct regional disparities.

It intends to align them with emerging national priorities and bring a sharper focus to inclusive development. The revised guidelines also aim to encourage and support environment-friendly lending policies to achieve Sustainable Development Goals (SDGs), the RBI said in a statement.

Detailed guidelines in this regard will be issued shortly. PSL guidelines were last reviewed in April 2015.

An incentive framework has been established to help banks address regional disparities, with respect to flow of priority sector credit.

Higher weighting will be assigned to incremental priority sector credit in identified districts where credit flow is comparatively lower, whereas a lower weighting will be assigned in case of a comparatively higher credit flow.

A K Das, MD and CEO of Bank of India, said the incentive scheme of PSL shall work favourably towards stability of the financial sector to support growth and recovery in the economy.

Another senior public sector banker pointed out that credit extended to start-ups would get the PSL tag. This seems to be a step to make more funds available to new-edge firms started by young entrepreneurs in upcoming areas of the digital ecosystem.

This would need a change in approach of bankers, to assess risks and do some degree of handholding.

The central bank said a move was also afoot for increasing targets in lending to ‘small and marginal farmers’ and the ‘weaker sections’.