The RBI Priority Sector Lending (PSL) Master Directions, 2025, updated as on January 19, 2026, consolidate and supersede the earlier 2020 guidelines. These Directions apply to Commercial Banks, Regional Rural Banks (RRBs), Small Finance Banks (SFBs), Local Area Banks (LABs), and Urban Co-operative Banks (UCBs), excluding Salary Earners’ Banks.
The revised framework aims to strengthen credit flow to underserve and priority segments of the economy, which is critical for inclusive and sustainable socio-economic development. A notable feature of the 2025 Directions is the introduction of a weight-based PSL system to address inter-regional credit imbalances, along with a refined methodology for computation of Adjusted Net Bank Credit (ANBC). Eligible priority sector activities are comprehensively detailed in Chapter III of the Directions.
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Overview of Priority Sector Categories
The Directions classify priority sector lending into eight broad categories, namely:
* Agriculture
* Micro, Small and Medium Enterprises (MSMEs)
* Export Credit
* Education
* Housing
* Social Infrastructure
* Renewable Energy
* Others (including Weaker Sections)
Domestic commercial banks are required to achieve an overall PSL target of 40% of ANBC, which includes 18% for agriculture, of which 8% must be to small and marginal farmers. Foreign banks with 20 or more branches must achieve an overall PSL target of 75% of ANBC, with sub-targets as prescribed.
Investments by banks in eligible priority sector instruments, including securitised assets and direct assignment transactions, are permitted to be reckoned for PSL compliance, provided the underlying assets continue to qualify as priority sector advances.
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Chapter III – Eligible Activities under PSL
Chapter III provides granular clarity on eligible activities under each priority sector to ensure targeted and outcome-oriented lending:
1. Agriculture
Includes:
* Crop loans and allied activities such as dairy, poultry, fisheries, and animal husbandry
* Investment credit for tractors, farm mechanisation, irrigation, and land development
* Working capital and term loans to small and marginal farmers
*Corporate farming and large agri-business entities remain outside the scope.
2. MSMEs
* Loans up to ₹5 crore to micro and small enterprises engaged in manufacturing or services
* Credit to khadi and village industries
* Support to MSME start-ups, including education-linked and skill-based financing
3. Export Credit
* Pre-shipment and post-shipment credit facilities
* Eligible up to ₹25 crore per borrower for exporters and merchant exporters
4. Education
* Loans up to ₹25 lakh per borrower
* Covers studies in India and abroad, including professional, technical, and vocational courses
5. Housing
* Individual housing loans up to:
* ₹35 lakh in metropolitan/urban areas for houses up to 60 sq. metres
* ₹25 lakh in other centres
* Loans up to ₹10 lakh for repairs and renovation
6. Social Infrastructure
* Financing for schools, healthcare facilities, drinking water, sanitation, and community infrastructure
* Focus on unbanked and under-banked districts
7. Renewable Energy
* Loans for solar, wind, biomass, bio-energy, and micro-hydel projects up to 20 MW
* Includes household and decentralized renewable energy solutions, subject to sub-limits
8. Others / Weaker Sections
* Credit to SC/ST borrowers, artisans, self-help groups, distressed farmers
* Loans to voluntary and non-governmental organizations working for disadvantaged and marginalized communities
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Key Updates and Compliance Requirements
The update as of January 19, 2026, reflects fine-tuning of targets and reporting mechanisms in line with evolving economic conditions. Greater emphasis has been placed on **digital reporting and monitoring through RBI-prescribed portals, enabling closer supervisory oversight.
Banks are required to:
* Report PSL achievement on a quarterly basis
* Transfer shortfalls to prescribed funds or eligible entities as notified by RBI
* Ensure internal controls and audit mechanisms for accurate classification and reporting
Failure to comply with PSL targets or reporting requirements may attract regulatory action, financial disincentives, or supervisory scrutiny.The RBI Priority Sector Lending (PSL) Master Directions, 2025, updated as on January 19, 2026, consolidate and supersede the earlier 2020 guidelines. These Directions apply to Commercial Banks, Regional Rural Banks (RRBs), Small Finance Banks (SFBs), Local Area Banks (LABs), and Urban Co-operative Banks (UCBs), excluding Salary Earners’ Banks.
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For bankers, credit officers, and compliance teams, the 2025 PSL Directions underscore the need for accurate credit classification, robust monitoring systems, and proactive planning to align business growth with regulatory expectations
