RBI gives priority sector lending status to Start-ups

In a big change in its lending norms, the Reserve Bank of India (RBI) has given priority sector lending status to start-ups.

This will allow thousands of start-ups functioning in different fields to access timely and adequate bank credit which otherwise would have been difficult to get given the risk profile attached to their projects.

Priority Sector Lending (PSL) is a tool given by the RBI to the banks for providing a specified portion of the bank lending to few specific sectors like agriculture and allied activities, micro and small enterprises, poor people for housing, students for education and other low income groups and weaker sections. Banks have to keep 40 per cent of Adjusted Net Bank Credit towards PSL.

Giving out the outcome of Monetary Policy Committee (MPC) meeting, RBI governor Shaktikanta Das said PSL guidelines have been reviewed in view of emerging national priorities and bring sharper focus on inclusive development and thus, “An incentive framework is now being put in place for banks to address the regional disparities in the flow of priority sector credit.”

Accordingly, the incentive will work with banks getting higher weightage for incremental priority sector credit in the identified districts having lower credit flow, and a lower weightage would be assigned in identified districts where the credit flow is comparatively higher.

“PSL status is also being given to start-ups; and the limits for renewable energy, including solar power and compressed bio-gas plants, are being increased,” Das said.