The Reserve Bank of India (RBI) has issued revised guidelines on Priority Sector Lending (PSL) after conducting a comprehensive review of the existing provisions. The revision process incorporated feedback from various stakeholders, including financial institutions, policymakers, and industry experts.
The new guidelines, which are set to come into effect from April 1, 2025, aim to enhance the coverage and effectiveness of PSL by introducing key modifications across different lending categories.
One of the major changes introduced under the revised guidelines is the enhancement of several loan limits, including those for housing loans. This revision is intended to improve access to credit for individuals and families seeking financial assistance for housing purposes.
By increasing the loan limits, the RBI aims to align PSL norms with the changing economic landscape, making it easier for borrowers to secure funding for housing, thereby promoting affordable housing and home ownership.
Another significant change pertains to the broadening of the purposes under which loans may be classified under the ‘Renewable Energy’ category. With the growing emphasis on sustainable development and clean energy, the revised guidelines expand the scope of renewable energy projects eligible for PSL classification.
This includes financing for solar energy, wind energy, biomass, and other renewable energy initiatives. By facilitating increased credit flow to renewable energy projects, the RBI seeks to support India’s transition to a more sustainable energy ecosystem.
Additionally, the revised guidelines introduce a revision in the overall PSL target for Urban Cooperative Banks (UCBs). The new target has been set at 60 percent of Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposures (CEOBSE), whichever is higher.
This change underscores the importance of UCBs in channeling credit to priority sectors and ensuring that a substantial portion of their lending is directed toward activities that contribute to economic development.
Furthermore, the RBI has expanded the list of eligible borrowers under the ‘Weaker Sections’ category, thereby improving credit access for marginalized communities. The revised guidelines also remove the existing cap on loans provided by UCBs to individual women beneficiaries.
This move is aimed at fostering greater financial inclusion by empowering women entrepreneurs and individuals who require financial assistance for various personal or business needs. By eliminating the cap, the RBI seeks to encourage financial institutions to provide more credit to women, thus promoting gender equality in access to banking services.
Overall, the enhanced coverage under the revised PSL guidelines is expected to facilitate better targeting of bank credit toward priority sectors, ensuring that financial resources are directed where they are needed the most.
By revising the PSL framework, the RBI continues its commitment to strengthening financial inclusion, supporting economic growth, and aligning banking regulations with evolving national priorities.
