PSL Framework Needs Overhaul To Align With Viksit Bharat 2047 Goals: SBI Research

New Delhi, Jul 9 (KNN) Priority Sector Lending (PSL) guidelines require a comprehensive review to align with India’s evolving financing needs and the Viksit Bharat 2047 vision, with greater emphasis on infrastructure, climate finance, renewable energy, along with enhanced lending limits across key sectors, according to a SBI Research report.

"Possibly, an opportune time has now come to assess future needs of financial inclusion and priority sector lending and make policy changes needed to ensure access to finance to weaker sections in line with Viksit Bharat objective," ANI reported, citing the report.

Existing Framework Needs Reform

The report said the PSL framework, introduced in 1972, has served its purpose but needs reform to address new priorities like ESG, sustainable development, infrastructure and EV financing.

It added that while banks are comfortably meeting the overall PSL target of 40 per cent of Adjusted Net Bank Credit (ANBC), the framework needs to evolve to better support India’s long-term growth ambitions.

Proposed Changes to Lending Limits

SBI Research has proposed raising lending limits across several PSL categories, including increasing the renewable energy loan cap from Rs 35 crore to Rs 100 crore and doubling the education loan ceiling eligible for PSL from Rs 25 lakh to Rs 50 lakh.

The report also suggested revising housing loan thresholds, expanding limits for social infrastructure financing, and enhancing bank lending caps to non-banking financial companies (NBFCs) for on-lending.

SBI Research said widening the scope of PSL to include infrastructure financing, creating a separate category for climate sustainability finance, and allowing investments in green and ESG bonds to qualify under PSL would better align the framework with emerging needs.

It also recommended classifying loans under government-sponsored schemes as lending to micro enterprises and weaker sections, noting that such measures would reflect India’s evolving development priorities while strengthening financial inclusion.

Infrastructure Financing

The report emphasised that infrastructure financing should receive greater policy support, given the significant long-term investment India requires to meet its 2047 development goals. 

It suggested either granting priority sector status to all infrastructure loans or excluding such lending from ANBC calculations for PSL compliance, arguing that existing rules do not adequately recognise banks' infrastructure financing efforts.

RIDF Reforms

SBI Research urged Rural Infrastructure Development Fund (RIDF) reforms, noting that changes in capital treatment and interest provisions could improve incentives for banks. It said lenders currently find it more attractive to purchase Priority Sector Lending Certificates (PSLCs) than to invest in the RIDF, underscoring the need to rebalance the framework.

It added that revising PSL norms in line with emerging sectors and expanding eligible categories would strengthen credit flow to areas critical for India’s next phase of economic growth, while supporting the broader Viksit Bharat agenda.

(KNN Bureau)