The central bank recently revised the incentive structure for PSL to boost credit flow

Current Context: The Reserve Bank of India (RBI) implemented changes to the Priority Sector Lending (PSL) program to encourage banks to lend more in areas with lower credit availability.

• Here's a breakdown of the revision:
• Higher weightage for underserved districts: Districts with a low per capita PSL (less than ₹9,000) get a weightage of 125% for any incremental PSL credit they achieve. This incentivizes banks to lend more in these areas.
• Lower weightage for saturated districts: Conversely, districts with a high per capita PSL (more than ₹42,000) get a weightage of only 90% for incremental PSL credit. This discourages banks from focusing solely on already well-served areas.

Question:

1 What is the weightage given to districts with a low per capita PSL (less than ₹9,000) for incremental PSL credit?

• A) 40%
• B) 90%
• C) 125%
• D) None of the above

Answer: C) Higher weightage for underserved districts: Districts with a low per capita PSL (less than ₹9,000) get a weightage of 125% for any incremental PSL credit they achieve. This incentivizes banks to lend more in these areas.