Public Sector Undertakings and Priority Sector Lending
In the Indian economy, public sector
undertakings comprise both public services and enterprises that benefit the
entire society. In this article, we discuss the objectives of setting up PSUs (Public sector
undertakings), their role in uplifting society, and their
problems and reforms.
Also, one
more piece of information we will be discussing in this guide is the PSL priority
sector lending. In certain cases, the Reserve Bank of India
allocates funds to specific sectors of the economy that may require financial
assistance, particularly when the absence of PSL would result in severe losses
for the participants in that sector. The RBI has urged banks to allocate funds
to sectors of the economy such as agriculture, education, housing, and food for
the poor.
Key Responsibilities of the Public Sector Undertakings
A number of ways are available for the
public sector to contribute to uplifting the economic condition of society.
Below are some of the major
responsibilities of the public sector:
● In the Indian economy, the public sector has
been a major contributor to capital formation. It is the public sector units in
India that provide the majority of the capital.
● Creating employment opportunities - The public
sector has brought about a major change in the employment sector. As a result,
they provide a lot of opportunities in various fields and contribute to the
economic and social development of India.
● Various regions across the country have
developed socio-economically due to the establishment of major factories and
plants. A number of facilities are available to the residents of the region,
such as electricity, water supply, and townships.
● Investing in advanced technology, automated
equipment, and instruments has been a priority for public sector units. As a
result of this investment, the overall cost of production would increase.
There are three major classifications in the public sector
A public sector can be divided into the
following categories:
- A departmental undertaking is
managed directly by the relevant ministry or department. (e.g. Railways,
Posts, etc.)
- Non-Departmental Undertaking -
Public Sector Undertakings (like HPCL and IOCL)
- Institutions such as SBI, UTI, LIC, etc are financial.
PSUs were established as a result of
industrialization and the establishment of capital goods and basic industries.
Priority Sector Lending (PSL): Explained in a Nutshell
A PSL initiative aims to provide credit to
the weaker sections of society rather than to fund only profitable sectors or
spaces that are solely important to economic growth. Banks are required to
offer loans to sectors considered priorities at a lower interest rate if they
are considered priority sectors.
Under the policy, the following sectors are
prioritized: agriculture (including microfinance groups like SHGs, JLGs,
individual farmers, and other organizations dedicated to individuals working in
agriculture), micro, small, medium, and large enterprises (MSMEs), small and
medium-sized enterprises (SSIs), educational, small-scale industrial, and
housing loans.
The number of PSL certificates (PSLCs) that
banks are allowed to issue in a specific sector is determined by their
overachieving PSL targets and their need for additional funding for priority
sectors. A trading platform called e-Kuber was developed by the RBI to allow
these certificates to be traded.
If you are interested in national
economics, then this is the right guide that will give you knowledge about PSUs
and PSLs. So, learn them and you can learn about how many types of financial
sectors are working in this nation.