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Priority Sector Lending – Top 37 Vital Bank Promotion MCQs ⏳ Updated: Apr 2026 | 🎯 37 MCQs
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Which of the following are recognized categories under Priority Sector Lending?
Explanation:
Correct: B
The designated categories under Priority Sector Lending include Agriculture, MSME, Export Credit, Education, Housing, Social Infrastructure, Renewable Energy, and Others. Heavy Industries are not part of this specific framework.
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In the context of agricultural lending, the term "Allied activities" includes
which of the following?
Explanation:
Correct: A
Under Priority Sector Lending guidelines for Agriculture, "Allied activities" explicitly cover dairy, fisheries, animal husbandry, poultry, bee-keeping, and sericulture. Manufacturing and construction fall under different codes.
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For the purpose of priority sector lending targets, the base for computation is the Adjusted Net Bank Credit (ANBC) or the ……, whichever is higher.
Explanation:
Correct: A
The targets for Priority Sector Lending are computed on the basis of the ANBC or the Credit Equivalent of Off-Balance Sheet Exposures (CEOBSE), whichever is higher. This ensures accurate calculation of **Adjusted Net Bank Credit**.
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Which of the following statements regarding Priority Sector Targets for different banking categories are correct?
1. Regional Rural Banks (RRBs) have a target of 75% of ANBC/CEOBSE.
2. Primary (Urban) Co-operative Banks (UCBs) and Small Finance Banks (SFBs) have a target of 60% of ANBC/CEOBSE.
3. Foreign Banks with less than 20 branches are exempt from Agriculture and Weaker Section sub-targets.
4. Domestic Commercial Banks have a total target of 40%.
Explanation:
Correct: D
In the Priority Sector Lending framework, RRBs have a 75% target, while Domestic Banks have 40%. UCBs/SFBs recently moved to higher targets (up to 75% in phases/specifics), but the statement reflects the base differentiation structure often cited in exam options.
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What is the specific sub-target prescribed for Small and Marginal Farmers (SMFs) under the Agriculture category for Domestic Commercial Banks?
Explanation:
Correct: B
Within the 18% Agriculture target of Priority Sector Lending, a specific sub-target of 10% is prescribed for Small and Marginal Farmers (SMFs) to ensure inclusive growth.
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Consider the following statements regarding adjustments for weights in PSL achievement:
Assertion (A): Incremental priority sector credit in identified districts with comparatively lower credit flow (per capita PSL < ₹9,000) is assigned a higher weight of 125%.
Reason (R): This framework is intended to incentivize credit flow to underserved districts and address regional disparities.
Explanation:
Correct: A
The RBI incentivizes Priority Sector Lending in underserved districts by assigning a 125% weight. This aligns with **RBI Master Directions** to address regional credit disparities effectively.
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Which of the following banking categories are EXEMPTED from the adjustments of weights in PSL achievement based on district-wise credit flow?
Explanation:
Correct: B
RRBs, UCBs, and Foreign Banks are exempted from the weight adjustments in Priority Sector Lending because of their specific operational areas or limited branch presence in these districts.
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For districts with comparatively higher credit flow (per capita PSL greater than ₹42,000), what weight is assigned to the incremental priority sector credit?
Explanation:
Correct: B
To balance regional growth in Priority Sector Lending, a lower weight of 90% is assigned to incremental credit in districts where the credit flow is already comparatively higher.
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What is the target for "Advances to Weaker Sections" for Small Finance Banks (SFBs)?
Explanation:
Correct: B
The Priority Sector Lending target for "Advances to Weaker Sections" for Small Finance Banks is 12%, which is distinct from the general **Small and Marginal Farmers** targets.
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Which of the following loans are eligible for classification as "Farm Credit" under the Agriculture category?
1. Loans for pre/post-harvest activities (spraying, grading).
2. Loans to distressed farmers indebted to non-institutional lenders.
3. Loans for installation of stand-alone solar agriculture pumps.
4. Loans to Small and Marginal Farmers for purchase of land for agricultural purposes.
Explanation:
Correct: D
All these activities are explicitly included under "Farm Credit" in Priority Sector Lending. This includes loans for solar pumps and purchasing land for agricultural use by small farmers.
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Which of the following loan limits for Agriculture classification are correct?
1. Corporate farmers/FPOs: Aggregate limit of ₹4 crore per borrowing entity.
2. Loans against Negotiable Warehouse Receipts (NWRs): Limit of ₹90 lakh.
3. Loans for Agriculture Infrastructure: Aggregate limit of ₹100 crore per borrower.
Loans to FPOs/FPCs undertaking farming with assured marketing of their produce at a pre-determined price are eligible for classification as Farm Credit up to:
Which of the following is NOT eligible to be classified under "Ancillary Services" in the Agriculture category?
For the purpose of priority sector classification, a "Small Farmer" is defined as a farmer with a landholding of:
Loans to FPOs/FPCs can be reckoned towards the "Small and Marginal Farmers" (SMF) sub-target provided that the land-holding share of SMFs in the FPO is not less than:
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All loans to units in the Khadi and Village Industries (KVI) sector are eligible for classification under which priority sector category?
Overdrafts extended to Pradhan Mantri Jan-Dhan Yojana (PMJDY) account holders are categorized as lending to:
Regarding Export Credit,
which of the following is correct?
What is the maximum loan limit per borrower for loans to individuals for educational purposes to be eligible for priority sector classification?
Which of the following Housing Loan scenarios are NOT eligible for priority sector classification?
1. Loans to a bank's own employees.
2. Loans backed by long-term bonds that are exempted from ANBC.
3. Investments by UCBs in bonds issued by NHB/HUDCO after April 1, 2007.
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Which of the following limits for Housing Loans are correct?
1. Metro Centres (Pop ≥ 50 lakh): Loan limit ₹50 lakh (Unit cost ₹63 lakh).
2. Metro Centres (Pop ≥ 50 lakh): Repairs limit ₹15 lakh.
3. Non-Metro (Pop < 10 lakh): Repairs limit ₹10 lakh.
Loans to Start-ups that conform to the definition of MSME are eligible for priority sector classification up to a limit of:
Bank loans for "Affordable Housing" are eligible if they use at least 50% of FAR/FSI for dwelling units with a carpet area of not more than:
Under "Social Infrastructure," loans up to ₹12 crore per borrower are eligible specifically for:
What is the loan limit per borrower for renewable energy-based power generators and public utilities to be eligible?
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Which of the following is NOT classified under the "Others" category?
Which of the following are classified as "Weaker Sections"?
1. Individual women beneficiaries up to ₹2 lakh per borrower (not applicable to UCBs).
2. Distressed persons (other than farmers) with loans up to ₹1 lakh to prepay non-institutional debt.
3. Artisans, village and cottage industries where individual credit limits do not exceed ₹2 lakh.
4. Beneficiaries of the DRI scheme.
Loans to Start-ups engaged in activities other than Agriculture or MSME are eligible under the "Others" category up to:
Which of the following limits regarding Bank Loans for On-Lending are correct?
1. Cap on MFI On-Lending: 10% of bank's total PSL.
2. Cap on NBFC/HFC On-Lending: 5% of bank's total PSL.
3. Loan limit for HFCs (Housing): ₹20 lakh per borrower.
4. Loan limit for NBFCs (Micro & Small Enterprises): ₹20 lakh per borrower.
Small Finance Banks (SFBs) are permitted to lend to registered NBFC-MFIs for on-lending provided the MFI has a 'Gross Loan Portfolio' (GLP) not exceeding:
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Regarding Priority Sector Lending Certificates (PSLCs), what amount is eligible for classification?
Investments by banks in Securitisation Notes are eligible for PSL classification provided the underlying assets represent loans to eligible categories EXCEPT:
The guidelines on "Co-lending by Banks and NBFCs" are NOT applicable to:
Regarding the monitoring of Priority Sector Lending Targets:
If a bank reports a shortfall of 8 percentage points in its overall PSL target, the interest rate on its RIDF contribution will be:
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Banks are prohibited from levying loan-related and ad hoc service charges on eligible priority sector loans up to:
Which of the following statements regarding Common Guidelines is incorrect?
Priority Sector Lending is the most critical banking awareness topic for aspirants today. In this comprehensive guide, we cover the 37 most important questions based on the latest guidelines. This vital mock test is specifically designed for Bank Exams, RBI, SBI, IBPS, and Promotion Exams to help you secure high marks in the General Awareness section.
Quick Revision: Key Facts for Priority Sector Lending
Categories: Priority Sector Lending includes 8 distinct categories like Agriculture and MSME.
Targets: Domestic banks have a 40% PSL target; RRBs have 75%.
Weights: Incremental credit to districts with low flow (
Small Farmers: Farmers with landholding >1 ha up to 2 ha.
Startups: Eligible up to ₹50 crore in MSME/Agriculture/Others.
Renewable Energy: Loan limit is ₹35 crore per borrower.
Education: Loans up to ₹25 lakh are eligible.
Frequently Asked Questions
Why is Priority Sector Lending critical for Bank Exams?
It is a high-scoring area. Mastering Priority Sector Lending ensures better performance in the objective papers of Bank Exams and RBI.
Does this test cover the full syllabus?
Yes, these Priority Sector Lending questions cover the most repeated concepts found in previous years’ papers.
What is the target for RRBs?
RRBs have a Priority Sector Lending target of 75% of their ANBC.
Are Startups covered under PSL?
Yes, Startups in Agri, MSME, and other sectors are eligible for Priority Sector Lending up to ₹50 crore.