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The Reserve Bank India (RBI) has issued revised guidelines on Priority Sector Lending (PSL) to facilitate better targeting of bank credit to the priority sectors of the economy. The new guidelines will come into effect from April 1, 2025. The RBI has stated that the enhanced coverage of the revised guidelines is expected to facilitate better targeting of bank credit to the priority sectors of the economy. The central bank has made some major changes in the new norms including enhancement of several loan limits, inclusion of Housing loan for enhanced PSL coverage and the broadening of the purposes based on which loans may be classified under renewable energy.

In RBI’s new norms, there is also a 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. Moreover, the revised norms also expand the list of eligible borrowers under the category of 'Weaker Sections,' along with the removal of the existing cap on loans by UCBs to individual women beneficiaries. Bank loans to the housing sector for priority sector classification have been prescribed in three categories where up to Rs 50 lakh loan limit provided for centres with a population of 50 lakh and above, a Rs 45 lakh loan limit for centres with a population of 10 lakh and above but below 50 lakh, while for centres with a population below 10 lakh has loan limit of Rs 35 lakh. Besides, the maximum cost of dwelling units has also been specified for each case.

As per the new guidelines, on renewable energy, bank loans up to a limit of Rs 35 crore to borrowers for renewable energy-based power generators and renewable energy-based public utilities will be eligible for priority sector classification, while for a individual households the loan limit will be Rs 10 lakh per borrower. The categories under the priority sector include agriculture, MSME, social infrastructure, education and renewable energy.