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Public Sector Undertakings and Priority Sector Lending

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:

  1. A departmental undertaking is managed directly by the relevant ministry or department. (e.g. Railways, Posts, etc.)
  2. Non-Departmental Undertaking - Public Sector Undertakings (like HPCL and IOCL)
  3. 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.