RBI Revises Priority Sector Lending Guidelines to Boost Credit Access

Mumbai, Mar 25 (KNN) The Reserve Bank of India (RBI) has introduced revised Priority Sector Lending (PSL) guidelines, set to take effect from April 1, 2025.

The changes aim to enhance financial inclusion by increasing loan limits, redefining weaker sections, and setting revised targets for Urban Cooperative Banks (UCBs).

A key update includes higher loan limits for housing and renewable energy projects. These adjustments are expected to facilitate greater credit flow to individuals in urban and rural areas while promoting clean energy investments.

Additionally, the PSL target for UCBs has been increased to 60 per cent of Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposures (CEOBSE), ensuring a stronger role for cooperative banks in priority sector financing.

The revised framework also broadens the scope of weaker sections by eliminating the cap on loans to women beneficiaries, fostering better financial access for economically disadvantaged groups.

Furthermore, different categories of banks must meet distinct PSL targets—domestic and foreign banks with over 20 branches must allocate 40 per cent of their ANBC to priority sectors, while Regional Rural Banks (RRBs) and Small Finance Banks (SFBs) have a higher requirement of 75 per cent.

Sectors benefiting from PSL include agriculture, MSMEs, export credit, education, housing, social infrastructure, and renewable energy. To address regional disparities, RBI has introduced a weighted credit allocation system, offering 125% weightage to districts with low credit penetration.

Banks failing to meet their PSL targets will have to contribute to the Rural Infrastructure Development Fund (RIDF) and other designated funds, ensuring funds still support priority sectors.

The updated PSL guidelines are expected to drive economic development, improve financial accessibility, and align banking strategies with national priorities.

(KNN Bureau)