New Delhi: Bharat Inc on Sunday urged the government to implement industry-friendly reforms, proposing India’s priority sector lending framework and advocating inclusion of emerging and high-impact sectors such as digital infrastructure, green initiatives, healthcare and innovative manufacturing. It also called for the establishment of more Development Finance Institutions (DFIs) to cater to new and emerging sectors.
“Priority Sector Lending (PSL) is an important policy tool in India, which aims to ensure that sectors critical to the nation’s development receive adequate financial support. Guided by the Reserve Bank of India (RBI), PSL allows banks to allocate a specified proportion of their loans to agriculture, It will force sequestration in sectors like education, housing and small scale industries,” said the Confederation of Indian Industry (CII), a major industry body.
CII also said that the framework ensures equitable credit distribution, which contributes to the socio-economic growth of underserved areas. “Despite its huge success, the PSL framework needs regular recalibration to remain relevant. CII said in a statement here today, ‘This recalibration is necessary to ensure that financial resources are optimally distributed in line with our vision of a developed India 2047. .
Arguing that the existing development finance institutions or DFIs such as SIDBI and the National Bank for Financing Infrastructure and Development have had their role cut as the financing sectors have been demarcated. “Constitution of a high-level committee to look into revision of PSL norms and explore the need for any new DFIs to cater to some of the new and emerging sectors,” it suggested.
For example, while agriculture today contributes 14 percent to GDP, its PSL allocation remains at 18 percent, when its GDP share exceeded 30 percent. “Similarly, sectors such as infrastructure and innovative manufacturing have the potential to drive economic growth but lack sufficient PSL focus. We can look to include emerging and high-impact sectors including digital infrastructure, green initiatives, healthcare, and innovative manufacturing,” Chamber of Industry said.
In a statement, the CII also said that in Chandrajit Banerjee’s opinion, the contribution of sectors like agriculture to GDP has declined from 30 percent in 1990 to 14 percent now. “Therefore, it is time to review the PSL framework every 3-4 years to align it based on emerging priorities and PSL allocations should be commensurate with GDP contribution and sectoral growth potential,” it said.