Finance Minister Nirmala Sitharaman has asked public sector banks to strengthen their approach to Priority Sector Lending and ensure that credit reaches the intended beneficiaries in a timely, adequate and productive manner. 
Banks are required to allocate 40 per cent of their adjusted net bank credit, or the credit equivalent of off-balance sheet exposure, to priority sectors. These include agriculture, MSMEs, housing and other sectors considered important for wider economic development. 
Speaking at the conclusion of the two-day PSB Confluence 2026, Sitharaman said the focus should be on expanding credit while also improving its quality. She said the effectiveness of PSL should not be judged only by whether banks meet numerical targets, but also by whether the credit reaches borrowers at the right time, is sufficient for their requirements and contributes to productive activity. 
She particularly called on PSBs to substantially increase credit support for farmers cultivating pulses and oilseeds. Higher lending to these crops, she said, can help reduce India's dependence on imports while supporting better soil health and contributing to the country's self-reliance in food production. 
The lending push for pulses and oilseeds is also expected to be aligned with the Prime Minister Dhan-Dhaanya Krishi Yojana, especially across the districts covered by the scheme. The government has been focusing on improving agricultural productivity and strengthening rural economic activity through better access to infrastructure, technology and institutional credit. 
Sitharaman also asked senior executives of state-owned banks to adopt a more robust approach towards PSL. She pointed out that agricultural lending should not become concentrated among larger farmers simply because they are easier for banks to finance. 
Instead, banks need to widen their reach among small and marginal farmers and ensure that institutional credit helps them improve productivity, diversify crops, adopt better technology and gain access to markets that offer better returns. 
The emphasis on small and marginal farmers is important because access to formal institutional credit remains a key part of improving farm investment and reducing dependence on informal sources of finance. The Economic Survey has previously highlighted the decline in the share of non-institutional sources of agricultural credit, reflecting the broader expansion of formal lending in the sector. 
The Finance Minister said PSL should ultimately result in genuine and productive credit reaching the people and businesses for whom the framework was created. She also viewed it as an opportunity for banks to deepen formal credit access, expand their customer base, strengthen enterprises and support wider economic growth. 
PSBs were advised to maintain close monitoring of their PSL performance, identify emerging gaps at an early stage and adopt appropriate business strategies to minimise shortfalls. The emphasis was on meeting lending requirements through actual and productive credit flow rather than relying only on compliance with prescribed targets. 
The focus on the quality of PSL also comes against the backdrop of earlier reviews in which the government has asked public sector banks to improve lending to specific sub-categories, including small and marginal farmers and micro enterprises. While the overall PSL performance of banks has generally remained above the mandated threshold, the government has continued to stress the need to meet targets across individual categories. 
Sitharaman also called on PSBs and public financial institutions to use their institutional capabilities to identify emerging opportunities and build the capacity needed to meet India's changing economic requirements. 
Financial Services Secretary Sanjay Lohia said the PSB Confluence had helped identify key priorities and develop clearer action points across its seven themes. These included deposit mobilisation, banking for youth, supporting the investment cycle, financing requirements linked to Global Capability Centres, agriculture and horticulture value-chain infrastructure, the credit card business and priority sector lending. 
The next step for PSBs and public financial institutions will be to convert the outcomes of the discussions into implementation plans with clearly assigned responsibilities and practical timelines. Lohia also said successful institutional models could be considered for wider adoption. 
The two-day confluence brought together senior representatives from public sector banks, public financial institutions, the government and domain experts to discuss issues affecting the future of the banking sector. Institutions including NABARD, EXIM Bank, SIDBI, NHB, IIFCL, IFCI and NaBFID were part of the broader discussions. 
The actionable strategies developed during the confluence will now be taken forward by the respective institutions through follow-up measures and implementation. 
As India works towards its Viksit Bharat 2047 objective, the government expects PSBs and public financial institutions to continue supporting financial inclusion, providing credit to underserved sections and financing new areas of economic activity. For PSL in particular, the emphasis is increasingly shifting from simply achieving lending numbers to ensuring that the credit provided creates a measurable economic benefit. 
Source PTI