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5) Discuss whether priority sector lending norms need to be done away with?(250 words)

Topic:Indian Economy and issues relating to planning, mobilization of resources ; Inclusive growth and issues arising from it.

5) Discuss whether priority sector lending norms need to be done away with?(250 words)




Why this question

Banking sector in India is reeling under several challenges. Access to credit for certain sectors is a huge challenge too. This makes the issue of PSL slightly complicated. In this backdrop, the decision of RBI to tighten PSL norms for foreign banks in India makes it imperative for us to discuss the issue.

Key demand of the question

The question is fairly straightforward. We have to analyze the pros and cons of PSL and evaluate whether the scheme needs to continue in its present form , needs to be scrapped or modified.

Directive word

Discuss – This is an all-encompassing directive – you have to debate on paper by going through the details of the issues concerned by examining each one of them. You have to give reasons for both for and against arguments.

Structure of the answer

Introduction – Explain the move of RBI which necessitates an evaluation of the effectiveness of PSL norms.



  • Explain PSL norms in detail along with the sub categories and the reforms brought in over the course of last three years. The aim has been to address credit woes of vulnerable section
  • Mention the benefits of the scheme
    • boosts inclusive growth reducing inequality and helps in capacity building of masses
    • Etc
  • Mention the disadvantages
    • Accentuate the banking crisis – bad loans
    • Role of specialist agencies in giving loans to sector like agriculture. Eg nabard
    • IMF report
    • Etc
  • Discuss what should be the way forward. What kind of reforms are required should be mentioned here

Conclusion – mention the advantages that access to credit would have for Indian economy and inclusive growth and the need to re-examine PSL norms to make it more effective.