Priority Sector Lending (PSL) in India: A Comparative study between public sector banks and private sector banks

This study conducts a comparative analysis of Priority Sector Lending (PSL) between public and private sector banks in India from 2019-20 to 2023-24. PSL is a crucial policy initiative by the Reserve Bank of India to ensure adequate credit flow to critical sectors, such as agriculture, small enterprises, and weaker sections. The study employs statistical methods, such as Mean, Standard Deviation, Coefficient of Variation, and Compound Annual Growth Rate, to analyze lending patterns across various PSL sub-sectors. Correlation tests are conducted to evaluate the relationship between public and Private Banks' lending activities. The findings reveal that private-sector banks exhibit superior growth rates across all PSL categories compared to public-sector banks. However, public-sector banks extend greater credit amounts in absolute terms. Private Banks demonstrate higher lending variability, whereas public banks show relative stability. Significant positive correlations were identified between the lending activities of both bank types across all the PSL categories. This study highlights the increasing involvement of private sector banks in PSL, although public sector banks maintain a predominant role. These findings suggest that future policies should leverage the strengths of both bank types to build a more inclusive and efficient PSL system in India. Ongoing monitoring and flexible regulations are crucial for ensuring that PSL effectively promotes inclusive growth and development.