Context:
The Reserve Bank of India (RBI) has issued revised guidelines on priority sector lending (PSL), aimed at facilitating better targeting of bank credit to priority sectors of the economy.
- These revised guidelines will come into effect from 1 April 2025.
- RBI stated that the enhanced PSL coverage is designed to improve credit flow to critical areas of the economy.
Key Changes in the New PSL Guidelines
a) Enhanced Loan Limits
- Several loan limit enhancements have been introduced to ensure greater PSL coverage, especially in sectors like housing and renewable energy.
b) Broadened Classification for Renewable Energy
- The RBI has broadened the loan purposes eligible for PSL classification under renewable energy, encouraging green financing and sustainable investments.
c) PSL Targets for Urban Cooperative Banks (UCBs)
- The overall PSL target for Urban Cooperative Banks (UCBs) has been revised to 60% of either:
- Adjusted Net Bank Credit (ANBC), or
- Credit Equivalent of Off-Balance Sheet Exposures (CEOBSE),
whichever is higher.
Implications of the Revised PSL Guidelines
- The new guidelines will support housing finance growth, push renewable energy lending, and strengthen the role of urban cooperative banks in priority sector development.
- This move aligns with the RBI’s focus on inclusive growth and sustainability in the credit ecosystem.
The revised PSL guidelines by RBI, effective April 2025, mark a significant step towards widening access to credit in priority sectors such as affordable housing, renewable energy, and cooperative banking. The emphasis on enhanced limits and target revisions will strengthen India’s push for inclusive economic growth and sustainable development.
