The Reserve Bank of India (Priority Sector Lending - Targets and Classification) Directions that are in force came into effect from

The correct answer is B, 40 per cent of Adjusted Net Bank Credit. A domestic commercial bank, and a foreign bank with 20 or more branches in India, must lend 40 per cent of its Adjusted Net Bank Credit, or of the Credit Equivalent of Off-Balance Sheet Exposure where that is higher, to the priority sector. The figure has stood at 40 per cent since 1985 and is repeated in the Reserve Bank of India (Priority Sector Lending - Targets and Classification) Directions, 2025. Option A is wrong because 18 per cent is the sub-target for agriculture alone, not the whole priority sector. Option C is wrong because 60 per cent is the target set for small finance banks and for primary urban co-operative banks, which were created to serve small borrowers. Option D is wrong because 75 per cent applies to regional rural banks, whose whole business is rural lending.

The correct answer is C, 18 per cent. Of the 40 per cent that a domestic commercial bank must lend to the priority sector, 18 per cent of Adjusted Net Bank Credit has to go to agriculture, which covers farm credit, agriculture infrastructure and ancillary activities. Within that 18 per cent there is a further sub-target of 10 per cent for small and marginal farmers and of 14 per cent for non-corporate farmers. Option A is wrong because 10 per cent is that small and marginal farmer slice, which sits inside the agriculture figure. Option B is wrong because 12 per cent is the target for weaker sections, an overlapping head that counts borrowers rather than activities. Option D is wrong because 7.5 per cent is the sub-target for micro enterprises under the micro, small and medium enterprises category.

The correct answer is C, defence production. The Directions list eight categories: agriculture, micro, small and medium enterprises, export credit, education, housing, social infrastructure, renewable energy and others. Defence production is not among them, however large the industry is, because the priority sector exists for borrowers who are starved of institutional credit, and defence firms borrow against government orders. Option A is wrong because export credit is the third listed category, kept there to help exporters who need working capital for short periods. Option B is wrong because social infrastructure is a category in its own right and carries loans for schools, drinking water, sanitation and health care facilities in smaller centres. Option D is wrong because renewable energy was added as a separate category, with a ceiling for a borrower and a smaller one for an individual household.

The correct answer is C, 75 per cent of Adjusted Net Bank Credit. A regional rural bank is set up under the Regional Rural Banks Act, 1976 to serve farmers, farm labourers and rural artisans, so the Reserve Bank asks it for a much higher share than it asks of a commercial bank: 75 per cent to the priority sector, with 18 per cent for agriculture, 10 per cent for small and marginal farmers, 7.5 per cent for micro enterprises and 15 per cent for weaker sections, the highest weaker sections target of any bank. Option A is wrong because 40 per cent applies to domestic commercial banks and to foreign banks with 20 or more branches. Option B is wrong because 60 per cent is the figure for small finance banks and primary urban co-operative banks. Option D is wrong because no bank is asked to put its entire credit in the priority sector.

The correct answer is C, 25 lakh rupees. Under the 2025 Directions a loan to an individual for educational purposes, including a vocational course, is classified as priority sector lending so long as it does not exceed 25 lakh rupees; the ceiling applies to the loan, not to the fee or the course. Option A is wrong because 10 lakh rupees is the ceiling for a loan to an individual household for a renewable energy installation, such as a rooftop solar system. Option B is wrong because 20 lakh rupees was the earlier education ceiling and was raised, so it is the classic trap in this question. Option D is wrong because 50 lakh rupees is the housing loan ceiling for a centre with a population of 50 lakh and above, where the cost of the dwelling unit must also stay within 63 lakh rupees.