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Priority Sector Lending (PSL) guidelines

Reserve Bank of India (RBI) has issued the revised guidelines on Priority Sector Lending (PSL) which has come into effect from April 01, 2025. 

To whom does Priority Sector Lending (PSL) guidelines apply?

Priority Sector Lending (PSL) guidelines apply to –

  • Commercial Bank [including Regional Rural Bank (RRB), Small Finance Bank (SFB), Local Area Bank (LAB)]
  • Primary (Urban) Co-operative Bank (UCB) other than Salary Earners’ Bank 

What are the categories under PSL?

The categories under priority sector are as follows –

  1. Agriculture
  2. Micro, Small and Medium Enterprises
  3. Export Credit
  4. Education
  5. Housing
  6. Social Infrastructure
  7. Renewable Energy
  8. Others

What are the PSL targets for banks?

The targets and sub-targets set under PSL, to be computed on the basis of the Adjusted Net Bank Credit (ANBC) / Credit Equivalent of Off-Balance Sheet Exposures (CEOBE) as applicable as on the corresponding date of the preceding year are as below –

Categories Total Priority Sector Agriculture Micro Enterprises Advances to Weaker Sections

 

 % of ANBC / CEOBE, whichever is higher
Domestic commercial banks (excluding RRBs & SFBs) & foreign banks with 20 branches and above 40%
18%
Within this target, 14% to Non-Corporate Farmers (NCF), out of which 10% to Small and Marginal Farmers (SMFs) 		7.5% 12%
RRBs
75%
To medium enterprises, social infrastructure and renewable energy only up to 15% 		15%
SFBs 75% 12%
UCBs 60% (earlier 75%) Not applicable 12%
Foreign banks with less than 20 branches
40%
Out of which, up to 32% to export credit and at least 8% to any other priority sector 		Not applicable

What weights are assigned to PSL achievements?

To address regional disparities in the flow of priority sector credit at the district level, weights have been assigned to ascertain the PSL achievements. From FY 2024-25 onwards –

  • Higher weight (125%) is assigned to the incremental priority sector credit in the identified districts where the credit flow is comparatively lower (per capita PSL less than ₹9000).
  • Lower weight (90%) is assigned for incremental priority sector credit in the identified districts where the credit flow is comparatively higher (per capita PSL greater than ₹42,000). 
  • Other districts continue to have normal weightage of 100%.

The list of both categories of districts given in the guidelines will be valid up to FY 2026-27. 

What are some of the loan limits for inclusion under PSL?

  • Farm Credit to individual farmers against pledge / hypothecation of agricultural produce (including warehouse receipts) for up to 12 months subject to a limit up to ₹90 lakh against Negotiable Warehouse Receipt (NWRs) / Electronic Negotiable Warehouse Receipt (eNWRs) and up to ₹60 lakh against warehouse receipts other than NWRs / eNWRs.
  • Export Credit (other than that classified under agriculture and MSME) –

Domestic banks / WoS of foreign banks / SFBs / UCBs Foreign banks with 20 branches and above Foreign banks with less than 20 branches
Incremental export credit over corresponding date of the preceding year, up to 2% of ANBC / CEOBSE whichever is higher, subject to a sanctioned limit of up to ₹50 crore per borrower. Incremental export credit over corresponding date of the preceding year, up to 2% of ANBC / CEOBSE whichever is higher. Export credit up to 32% of ANBC / CEOBSE whichever is higher.

  • Loans to individuals for educational purposes, including vocational courses, not exceeding ₹25 lakh.
  • Loans to individuals for purchase / construction of a dwelling unit per family and loans for repairs to damaged dwelling units, subject to the following limits –
Category Maximum Cost of Dwelling Unit# Loan limit for purchase / construction# Loan limit for repairs#
Centres with population of 50 lakh and above ₹63 lakh ₹50 lakh ₹15 lakh
Centres with population of 10 lakh and above but below 50 lakh ₹57 lakh ₹45 lakh ₹12 lakh
Centres with population below 10 lakh ₹44 lakh ₹35 lakh ₹10 lakh
#to be eligible, the loan to satisfy both the criteria of ‘maximum cost of dwelling unit’ and ‘loan limit’

  • Bank loans up to ₹35 crore to borrowers for renewable energy-based power generators and for renewable energy based public utilities, viz., street lighting systems, remote village electrification etc. For individual households, the loan limit will be ₹10 lakh per borrower.

What action is taken against banks failing to achieve PSL target?

All banks (excluding UCBs under all-inclusive directions) reporting shortfall in PSL vis-à-vis the prescribed target / sub-targets shall contribute to Rural Infrastructure Development Fund (RIDF) and other funds with National Bank for Agriculture and Rural Development (NABARD) / National Housing Bank (NHB) / Small Industries Development Bank of India (SIDBI) / Micro Units Development & Refinance Agency Ltd. (MUDRA Ltd). The terms and conditions of the funds shall be as decided by RBI.

The interest rates payable to banks for their contribution to RIDF and other funds shall be as follows –

Shortfall in overall PSL target Deposit Rates
Less than 5% Bank Rate (-) 2%
5% and above, but less than 10% Bank Rate (-) 3%
10% and above Bank Rate (-) 4%
No shortfall in overall PSL target but shortfall in any sub-target Bank Rate (-) 2%

What is the limit for service charges on priority sector loans?

No loan related and ad hoc service charges / inspection charges shall be levied on priority sector loans up to ₹50,000. In the case of eligible priority sector loans to Self-Help Groups (SHGs) / Joint Liability Groups (JLGs), this limit is applicable per member and not to the group as a whole.


References

Reserve Bank of India. (2025, March 24). 'Master Directions - Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2025'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12799&Mode=0#F1

Reserve Bank of India. (2025, March 24). 'RBI Releases Revised Priority Sector Lending Guidelines'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=60048

Reserve Bank of India. (2025, March 24). 'Review of Priority Sector Lending (PSL) Target – Urban Co-operative Banks (UCBs)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12797&Mode=0


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