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    Question

    Which institutional mechanism deals with banks’

    shortfalls in meeting Priority Sector Lending (PSL) targets, and how are such funds utilized?
    A NABARD, to finance agriculture and rural infrastructure projects Correct Answer Incorrect Answer
    B SIDBI, exclusively for MSME development and credit enhancement Correct Answer Incorrect Answer
    C Rural Infrastructure Development Fund (RIDF), for rural development projects managed by NABARD Correct Answer Incorrect Answer
    D National Housing Bank, to support affordable housing schemes Correct Answer Incorrect Answer
    E Mudra Fund, focusing on microfinance and startups Correct Answer Incorrect Answer

    Solution

    • If commercial banks fail to achieve their PSL targets, the shortfall is not left idle. Instead, they are required to deposit the shortfall amount into the Rural Infrastructure Development Fund (RIDF). • The RIDF is managed by NABARD (National Bank for Agriculture and Rural Development). • These funds are then deployed towards financing rural infrastructure projects such as irrigation, roads, bridges, health centers, and other development schemes in rural areas. • This mechanism ensures that even if banks fail to lend directly to priority sectors, the shortfall still contributes to strengthening rural development and infrastructure.

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