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      Question

      How do Priority Sector Lending (PSL) compliance

      requirements differ between foreign banks with 20 or more branches and those with fewer than 20 branches?
      A Foreign banks with more branches have higher PSL targets. Correct Answer Incorrect Answer
      B Smaller foreign banks must focus exclusively on agricultural lending. Correct Answer Incorrect Answer
      C Foreign banks with fewer than 20 branches can allocate up to 32% of their PSL targets to export credit. Correct Answer Incorrect Answer
      D Banks with fewer branches are exempt from PSL targets. Correct Answer Incorrect Answer
      E PSL percentages are fixed and uniform for all foreign banks. Correct Answer Incorrect Answer

      Solution

      RBI differentiates PSL requirements for foreign banks based on their branch network in India: • Foreign banks with 20 or more branches → Must comply with the same PSL targets as domestic commercial banks, which includes agriculture, MSMEs, weaker sections, etc. • Foreign banks with fewer than 20 branches → Are given flexibility. They can allocate up to 32% of their PSL requirement to export credit, unlike their larger counterparts. • This differentiation recognizes the limited physical presence of smaller foreign banks in rural/semi-urban areas, while still ensuring their contribution to priority sectors.

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