New Delhi, Dec 22 (NationPress) The Confederation of Indian Industry (CII) has advocated for modifications in India's Priority Sector Lending (PSL) framework to foster the creation of more Development Finance Institutions (DFI) that would finance new and emerging sectors like digital infrastructure, green initiatives, healthcare, and innovative manufacturing.
The current Development Finance Institutions, such as SIDBI and NABFID, have specific sectors assigned for financing. Consequently, CII has proposed the formation of a high-level committee to review Priority Sector Lending norms and assess the necessity of new DFIs to address the needs of emerging sectors.
Despite its significant success, the PSL framework demands continual adjustments to maintain its relevance. This recalibration is crucial to ensure that financial resources are allocated efficiently, aligning with the vision of Viksit Bharat 2047, according to the statement.
For instance, although agriculture currently represents 14 percent of GDP, its allocation under PSL remains at 18 percent, unchanged since its GDP share surpassed 30 percent. Likewise, sectors such as infrastructure and innovative manufacturing are underrepresented in PSL focus, despite their potential to stimulate economic growth.
India's economy has undergone rapid transformations over the last few decades, with a shift in employment towards newer sectors driven by rising education levels and increased disposable incomes, the statement highlighted.
The PSL serves as a crucial policy instrument in India, designed to guarantee that vital sectors essential for the nation's development receive sufficient financial backing. Mandated by the Reserve Bank of India (RBI), PSL requires banks to allocate a defined percentage of their loans to sectors like agriculture, education, housing, and small industries. This framework promotes equitable credit distribution, thereby contributing to the socio-economic development of underprivileged regions.
CII Director General Chandrajit Banerjee stated: "Sectors like agriculture have seen a decline in their GDP contribution from 30 percent in the 1990s to roughly 14 percent today. Thus, it is imperative that the Priority Sector Lending (PSL) framework undergoes a review every 3-4 years to align with emerging priorities, ensuring that PSL allocations reflect GDP contributions and sectoral growth potential. For example, we should consider including Emerging and High-Impact Sectors, encompassing digital infrastructure, green initiatives, healthcare, and innovative manufacturing.
The industry chamber has, therefore, recommended the inclusion in PSL of sectors such as green energy projects, electric vehicles, and climate-resilient agriculture, along with digital technologies, artificial intelligence, and healthcare innovation.
The CII further emphasized that in addition to the aforementioned sectors, infrastructure and manufacturing are set to play significant roles in enhancing India’s economic growth.
It proposed a transition towards outcome-based metrics, shifting focus from absolute lending targets to measurable developmental results, thus ensuring impact-driven credit distribution.
