A plethora of researches are available worldwide relating directly and indirectly to Priority Sector Lending practices. The term ‘directed credit’ has been used extensively in international context to denote what in India is referred to as Priority Sector Lending. The works of some scholars have been reviewed systematically in order to draw inferences on the emergence, developments, rationale and status of Priority Sector Lending in India. Amongst the categories under norms of priority sector lending, advances to MSMEs is the concern of the present study. Hence, literatures related to credit disbursement to micro, small and medium enterprises are taken into consideration. Also, studies related to the criticisms made on the grounds of creation of Non Performing Assets, high transaction costs, lower profitability of banks which discourages present scenario of Priority Sector Lending have been reviewed. Thus an attempt has been made in the present chapter to get insights into the extant literature pertaining to Priority sector lending to MSMEs.