New Delhi: The Economic Advisory Council to the Prime Minister (EAC-PM) has said that India's priority sector lending (PSL) framework has played a key role in addressing credit market failures and promoting financial inclusion, but cautioned that indiscriminate expansion of directed credit may not necessarily translate into higher economic growth.
In its working paper titled "Economic impact analysis of Priority Sector Lending", the EAC-PM noted that the policy has been operational in India "for almost five decades" and mandates banks to direct "at least 40% of their overall credit towards the priority sector."
