The Reserve Bank of India (RBI) has issued revised guidelines on Priority Sector Lending (PSL) following a comprehensive review of existing provisions and stakeholder feedback. These updated norms introduce several significant changes, including an increase in loan limits for housing and renewable energy projects, as well as modifications to the classification criteria for priority sector loans.
The revised guidelines, effective from April 1, 2025, include the following key amendments:
- Enhancement of various loan limits, including housing loans, to improve PSL coverage.
- Expansion of the purposes under which loans can be classified as ‘Renewable Energy’.
- Revision of the overall PSL target for Urban Cooperative Banks (UCBs) to 60% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposures (CEOBSE), whichever is higher.
- Expansion of the list of eligible borrowers under the ‘Weaker Sections’ category and removal of the existing cap on loans by UCBs to individual women beneficiaries.
According to the RBI, these revisions are expected to facilitate more effective targeting of bank credit towards priority sectors, enhancing financial inclusion and economic development.
Housing Loan Limits Under PSL
The RBI has revised the limits on housing loans eligible for PSL classification, with specific thresholds based on the population size of urban centers:
- ₹50 lakh for centers with a population of 50 lakh and above.
- ₹45 lakh for centers with a population between 10 lakh and 50 lakh.
- ₹35 lakh for centers with a population below 10 lakh.
Additionally, the maximum cost of dwelling units has been specified for each category to ensure appropriate coverage under PSL norms.
Renewable Energy Loan Limits
Under the revised guidelines, bank loans for renewable energy projects are now eligible for PSL classification, subject to the following limits:
- ₹35 crore per borrower for renewable energy-based power generation and public utility projects.
- ₹10 lakh per borrower for individual households adopting renewable energy solutions.
Adjustments for Urban Cooperative Banks (UCBs)
The overall PSL target for UCBs has been revised to 60% of ANBC or CEOBSE, whichever is higher. This revision aims to align cooperative banking institutions with broader financial inclusion objectives.
Expansion of the Weaker Sections Category
The RBI has broadened the definition of ‘Weaker Sections’ to include additional eligible borrowers. Moreover, the previous cap on loans extended by UCBs to individual women beneficiaries has been removed, promoting greater access to financial resources for women.
Priority Sector Categories
The updated PSL framework continues to encompass the following categories:
- Agriculture
- Micro, Small, and Medium Enterprises (MSMEs)
- Export Credit
- Education
- Housing
- Social Infrastructure
- Renewable Energy
These revisions reflect the RBI’s ongoing efforts to optimize the PSL framework, ensuring better financial access for key sectors while maintaining the overall PSL target at 40% of total bank credit.
