FM Sitharaman: Address Gaps in Priority Sector Lending

New Delhi, Aug 18 (PTI) Finance Minister Nirmala Sitharaman on Tuesday asked public sector banks to address the gaps in Priority Sector Lending (PSL) and work towards improving the quality of such lending, as they play a very important role in the country's development.

Banks are required to allocate 40 per cent of their total loans towards priority sectors, which include agriculture, MSMEs and housing.

Stressing that credit to farmers, MSMEs, MUDRA beneficiaries and weaker sections remains a top priority of this government, Sitharaman said, "Our objective must be to expand credit while also improving the quality of PSL. Its success should be assessed not merely by numerical targets, but by whether the credit is timely, whether it is adequate and whether it is productive."

In her concluding remarks at the two-day PSB Confluence 2026, she said banks must substantially expand credit to farmers growing pulses and oilseeds, which will reduce India's dependence on imports and help improve soil health and bring Atmanirbharta.

This effort should be closely aligned with the Prime Minister Dhan-Dhaanya Krishi Yojana, particularly in the districts covered under the scheme, she said.  

Sitharaman told the senior executives of state-owned banks attending the event that "your approach to dealing with priority sector lending should be a lot more robust".

Observing that agricultural lending cannot become concentrated among larger farmers merely because they are easier to finance, she said, banks must widen their reach and ensure that institutional credit enables small and marginal farmers to raise productivity, diversify cultivation, adopt better technology and connect with remunerative markets.


The objective should ultimately be to ensure genuine and productive credit flow to the intended beneficiaries, she said, adding that PSL should be seen as an opportunity to deepen formal credit, expand the customer base, create stronger enterprises and support broad-based economic growth.

Public Sector Banks (PSBs) were encouraged to maintain their strong focus on PSL through granular monitoring, early identification of emerging gaps and appropriate business strategies, with the objective of minimising shortfalls through genuine and productive credit flow to intended beneficiaries.

She called upon PSBs and Public Financial Institutions (PFIs) to build on their institutional strength, anticipate emerging opportunities and develop capabilities to support India's evolving economic requirements.   During the event, Financial Services Secretary Sanjay Lohia emphasised that the Confluence has enabled sharper identification of priorities and clearer action across the seven themes.

PSBs and PFIs would now need to translate these into implementation with clear ownership and realistic timelines, while successful institutional models could be examined for wider adoption, he said.

PSB Confluence 2026 brought together the collective experience and capabilities of PSBs, PFIs, Government and domain experts across areas critical to the future of banking.

The actionable strategies emerging from the Confluence will now be taken forward by the concerned institutions through appropriate follow-up and implementation.

As India advances towards Viksit Bharat 2047, PSBs and PFIs will continue to play an important role in deepening financial inclusion, financing emerging opportunities and supporting the country's next phase of growth, he said.