Revised Priority Sector Lending Guidelines by RBI a Boost for Renewables

RBI has issued revised guidelines for priority sector lending to enable better credit penetration to credit deficient areas, a boost for the renewables sector.

The Reserve Bank of India (RBI) has issued revised guidelines for priority sector lending to enable better credit penetration to credit deficient areas and increase lending to small and marginal farmers besides weaker sections. In addition, the initiative will boost credit to the renewables sector, amongst a few others.

The RBI said that bank finance to start-ups up to Rs 50 crore, loans to farmers for installation of solar power plants for solarisation of grid-connected agriculture pumps, and loans for setting up compressed bio-gas (CBG) plants have been included as fresh categories eligible for finance under priority sector.

On the basis of the new guidelines, farmers now can get priority loans for the installation of standalone solar agriculture pumps and solarisation of grid-connected agriculture pumps. Similarly, farmers can also avail priority loans for the installation of solar power plants on barren land or in stilt fashion on agriculture land.

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To address regional disparities in the flow of priority sector credit, higher weightage has been assigned to incremental priority sector credit in identified districts where priority sector credit flow is comparatively low.

Besides, the targets prescribed for small and marginal farmers and weaker sections are being increased in a phased manner. A higher credit limit has been specified for farmers producers organisations and companies undertaking farming with assured marketing of their produce at a pre-determined price.

And loan limits for renewable energy have been doubled.

The central bank said it comprehensively reviewed the PSL guidelines to align it with emerging national priorities and bring a sharper focus on inclusive development after having wide-ranging discussions with all stakeholders.

The move by RBI, which made small solar plants on barren land eligible for loans under the new guidelines, works well with the recent impetus provided by the state government of Rajasthan to its farmers to move away from using subsidised conventional power and facilitate a shift to renewable energy.