Directed lending through programs such as the Priority Sector Lending (PSL) program of the RBI have had a well-established history across many countries at different points in their development curve with different purposes. In India, the PSL Policy has also been an important intervention to ensure that certain sectors deemed as important for national development receive adequate credit. The PSL program has been implemented by the RBI since 1974, when banks were advised to raise credit to priority sectors to the level of 33.3% by March 1979. Today this number stands at 40%, out of which direct agriculture lending has to be 18%. While the need for a Priority Sector Lending program is not in question, there is a need for a deeper discussion on the design, strategies and mechanisms to achieve these objectives.
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