RBI releases new guidelines for priority sector lending (PSL)

Following a detailed review as well as stakeholder consultation, the apex banker Reserve Bank of India (RBI) has announced new priority sector lending (PSL) norms that will come into effect from April 1, 2025.

Aiming to boost credit flow to some of the major sectors, the new PSL norms would incorporate higher loan limits, widen eligibility criteria as well as increase PSL targets for banks.

For the sectors including housing as well as renewable energy (RE), the loan limit has been enhanced. It added that loans to the tune of Rs 35 crore offered for the renewable energy projects will be covered under the priority sector lending.

"Bank loans up to a limit of ₹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., will be eligible for priority sector classification," it noted.

This move is designed to encourage sustainable finance and support green energy initiatives, in line with India's long-term environmental goals.

Additionally, the PSL targets for Urban Cooperative Banks (UCBs) have been increased to 60 per cent of Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposures (CEOBSE), whichever is higher.

The higher limit is aimed at increasing the role of cooperative banks in funding priority sectors, ensuring a more inclusive credit system.

Alongside, the coverage of borrowers under the 'Weaker Sections' has been increased. The RBI has removed the existing cap on loans by UCBs to individual women beneficiaries, allowing greater financial inclusion for women. This is expected to boost credit access to underserved groups, promoting gender equity.

On the development, stocks like LIC Housing Finance, PNB Housing Finance, REC, PFC and IREDA will be in focus.