Financial Awareness - Risk, Stability & Emerging Finance
Which of the following best describes the classification of Priority Sector Lending into direct and indirect finance?
Which of the following best describes the classification of Priority Sector Lending into direct and indirect finance?
hard Q10 of 15
Step-by-Step Solution
Step 1: Understand PSL classification
Priority Sector Lending is classified into direct and indirect finance based on the nature of lending.Step 2: Define direct and indirect finance
Direct finance refers to loans given directly to priority sectors like agriculture, MSMEs, education. Indirect finance refers to loans given to entities that support these sectors, such as input suppliers.Step 3: Distinguish definitions
Direct finance is lending directly to priority sectors and indirect finance to supporting entities. Reversing the definitions is incorrect. Indirect finance is recognized under PSL.Final Answer:
Direct finance is lending directly to priority sectors; indirect finance is lending to entities supporting priority sectors → Option AQuick Check:
PSL direct finance = direct lending; indirect finance = lending to supporters ✅
Quick Trick: Remember direct = direct lending; indirect = lending to supporters.
Common Mistakes:
- Confusing direct and indirect finance definitions or ignoring indirect finance.
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