Recent news from the Reserve Bank of India (RBI) has brought it to the forefront due to a series of economic measures they have taken. The steps include revising Priority Sector Lending (PSL) norms, an increase in the Loan to Value ratio (LTV) on gold loans, and the launch of an online dispute resolution system for digital payments.
The last time the RBI reviewed the PSL guidelines was in April 2015. All these measures, including the revised PSL norms, are crucial to understanding the current economic scenario in India.
Revised PSL Norms: Empowering Start-ups and Renewable Energy Sectors
An exciting highlight of these changes is that PSL status now extends to startups, a move that will see a boost in entrepreneurship in the country. There has also been an increase in borrowing limits for renewable energy sectors, particularly solar power and compressed biogas plants.
This step is in line with global trends that focus on sustainable development and environmental concerns. It’s a recognition of the importance of these sectors and their pivotal role in a sustainable future.
New Targets for Small Farmers and Weaker Sections
The RBI has increased targets for lending to ‘Small and Marginal Farmers’ and ‘Weaker Sections’. This initiative aims to narrow regional disparities in the flow of priority sector credit, ensuring equitable distribution of resources.
Making credit more accessible to these vulnerable groups can help stimulate local economies and foster inclusive growth.
New PSL Norms: Aligning with National Priorities
The decision to revise the PSL norms aligns them with emerging national priorities and places a sharper focus on inclusive development. The aim is to encourage environment-friendly lending policies that contribute towards achieving Sustainable Development Goals (SDGs).
Priority Sector Lending
As a mandate by the RBI, banks are required to lend a specific portion of their funds to specific sectors. These sectors include agriculture, Micro, Small and Medium Enterprises (MSMEs), export credit, education, housing, social infrastructure, renewable energy among others.
Increased Loan to Value Ratio
RBI has also decided to increase the permissible LTV for loans sanctioned against gold ornaments and jewellery for non-agricultural purposes to 90% from the previous 75%. This increase will be effective until 31st March 2021.
Introduction of Offline Retail Payments Scheme
In a bid to foster financial inclusion, the RBI has unveiled an offline retail payments scheme using cards and mobile devices. This initiative becomes highly relevant with the steady growth in digital payments via mobile phones, cards and wallets, especially given the periodic lack or slow internet connectivity in remote areas.
Launch of Online Dispute Resolution for Digital Payments
Acknowledging the rise in digital transactions, and by extension, disputes arising from them, the RBI has introduced an Online Dispute Resolution (ODR) mechanism for digital payments. The mechanism is designed to efficiently address issues resulting from the surge in digital transactions.
