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Removing regional disparities in PSL

The ‘Internal Working Group to Review Agricultural Credit’ set up by the Reserve Bank of India had flagged the issue of regional disparity in credit flow to agriculture. The incentive framework was put in place for banks, effective 1 April 2021, to address the regional disparities in the flow of priority sector credit. RBI’s Annual Report for 2020-21, said the central bank’s efforts in ensuring higher credit flow need to be effectively complemented by central and state governments in increasing the credit absorption capacity in underserved areas for a sustainable change. Some important changes have been brought out under the PSL guidelines: the targets prescribed for ‘small and marginal farmers’ and ‘weaker sections’ are being increased in a phased manner; bank finance to startups (up to Rs500 million); loans to farmers for installation of solar power plants for solarisation of grid connected agriculture pumps; and loans for setting up compressed biogas plants included as fresh categories eligible for finance under priority sector.  Higher credit limit was specified for Farmers Producers Organizations/Farmers Producers Companies undertaking farming with assured marketing of their produce at a pre-determined price.

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