---
title: "Priority Sector Lending Definition | Model Diplomat"
description: "Priority Sector Lending mandates banks to allocate credit to crucial sectors like agriculture and small enterprises, aiding economic growth and development."
url: "https://modeldiplomat.com/learn/glossary/priority-sector-lending"
---

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Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- Priority Sector Lending is the RBI mandate requiring banks to direct a fixed share of credit to economically weaker and developmentally critical sectors such as agriculture and small enterprises.
- What is the overall PSL target and the key sub-targets?
- What happens if a bank fails to meet its PSL target?
- What are Priority Sector Lending Certificates (PSLCs)?
- Which committees shaped India's PSL framework?

[Civil Service & Diplomatic Exams](https://modeldiplomat.com/learn/civil-services/glossary)Updated June 22, 2026

Priority Sector Lending is the RBI mandate requiring banks to direct a fixed share of credit to economically weaker and developmentally critical sectors such as agriculture and small enterprises.

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In FY 2022-23 the State Bank of India met its priority-sector obligations partly by purchasing Priority Sector Lending Certificates, while NABARD's RIDF absorbed shortfall contributions from several banks that fell below the 18% agriculture sub-target.

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