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Priority Sector Lending (PSL) guidelines (updated as on September 11, 2026)

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 (CEOBSE) as applicable as on the corresponding date of the preceding year are as below (Updated as on January 19, 2026) –

Categories Total Priority Sector Agriculture Micro Enterprises Advances to Weaker Sections

 

 % of ANBC / CEOBSE, 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 60% (earlier 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 are Priority Sector Lending Certificates (PSLCs)?

  • When a bank achieves priority sector lending in excess of the prescribed target, it can sell the surplus achievement in the form of PSLCs to banks that are falling short of their PSL targets.
  • PSLCs are of the following types –

Type of PSLCs Represents Counted for
PSLC - Agriculture All eligible Agriculture loans except loans to SF/MF for which separate certificates are available Achievement of agriculture target and overall PSL target
PSLC - SF/MF All eligible loans to small / marginal farmers Achievement of SF/MF sub-target, Weaker Sections sub-target, Non-Corporate Farmers (NCF) sub-target, agriculture target and overall PSL target
PSLC - Micro Enterprises All priority sector loans to micro enterprises Achievement of micro-enterprise sub-target and overall PSL target
PSLC - General The residual priority sector loans i.e. other than loans to agriculture and micro enterprises for which separate certificates are available Achievement of overall PSL target

  • SFBs are permitted to purchase PSLCs only for the specific purpose of meeting the PSL sub-targets within the overall PSL target.
  • PSLCs are traded through the CBS portal (e-Kuber) of Reserve Bank of India (RBI). The order matching is done on an anonymous basis.
  • PSLCs have a standard lot size of ₹25 lakh and multiples thereof.
  • The buyer pays a fee to the seller which is market determined.
  • There is no transfer of credit risk as there is no transfer of loan assets.
  • All PSLCs expire by March 31st, irrespective of the date it is first sold. It cannot be for more than 1 year.
  • Secondary market is available for PSLCs. Banks buy PSLCs in anticipation of shortfall. However, in case there happens to be surplus, they can sell this surplus.
  • Net position of PSLCs sold and purchased is to be reported by banks on quarterly and annual basis.
  • If RBI inspection team de-classifies a particular PSLC (which has been already traded by the bank as PSLC), it is reduced from the achievement of PSLC seller bank only. There is no counterparty risk for the PSLC buyer.

How is bank’s PSL achievement calculated?

A bank’s PSL achievement is computed as the sum of outstanding priority sector loans and the net nominal value of PSLCs issued and purchased, provided the underlying assets originated by banks are eligible for classification as priority sector advances. 

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 charges (including guarantee fees of credit guarantee schemes), 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.

What are recent updates in PSL guidelines?

  • Bank credit to National Co-operative Development Corporation (NCDC) for on-lending to co-operative societies for purposes and activities as laid down in the PSL guidelines will be eligible for classification as priority sector lending under the respective categories. (Updated as on January 19, 2026)
  • The following advances extended in India will be excluded from the calculation of ANBC (Updated as on September 11, 2026) –
    • Advances against the fresh Foreign Currency Non-Resident (Bank) [FCNR (B)] deposits of minimum tenor of 3 years and maximum tenor of 5 years mobilised (including deposits that are renewed upon maturity) by the banks between June 08, 2026 and August 31, 2026 (previously till September 30, 2026).
    • Advances against Non-Resident (External) Rupee (NRE) term deposits of 3 years or more mobilised (including deposits that are renewed upon maturity) by the banks between June 19, 2026 and August 31, 2026 (previously till September 30, 2026).


References

Reserve Bank of India. (2021, November 09). FAQs on Master Directions on Priority Sector Lending Guidelines. Retrieved from https://www.rbi.org.in/Scripts/FAQView.aspx?Id=87

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

Reserve Bank of India. (2026, January 19). RBI Issues Amendment Directions on Priority Sector Lending - Targets and Classification. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=62063

Reserve Bank of India. (2026, January 19). Reserve Bank of India (Priority Sector Lending – Targets and Classification) (Amendment) Directions, 2026. Retrieved from https://rbi.org.in/Scripts/NotificationUser.aspx?Id=13280&Mode=0

Reserve Bank of India. (2026, August 07). Reserve Bank of India (Priority Sector Lending – Targets and Classification) Second Amendment Directions, 2026. Retrieved from https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=13674&Mode=0

Reserve Bank of India. (2026, September 11). Reserve Bank of India (Priority Sector Lending – Targets and Classification) Third Amendment Directions, 2026. Retrieved from https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=13698&Mode=0


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