Revision of Priority Sector Lending (PSL) Guidelines by RBI

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 In an attempt to bring about a sharper focus on inclusive development and in order to align the PSL with emerging national priorities, RBI has undertaken a revision of PSL guidelines that would enable:

(1) Better credit penetration to credit deficient areas through: 
    (a) Announcement of fresh category for eligibility under bank funding:-
              (i) Start-ups with a lending limit of upto Rs. 50 crore
             (ii) Loans to farmers for installation of solar power plants for solarisation of grid connected agriculture pumps    
            (iii) Loans for setting up Compressed Bio Gas (CBG) plants
    (b) higher weightage (125%) has been assigned to incremental priority sector credit in 184 identified districts where priority sector credit flow has been comparatively low (per capita PSL less than Rs. 6,000). Lower weight (90%) would be assigned for incremental priority sector credit in the 205 identified districts where the credit flow is comparatively higher (per capita PSL greater than Rs. 25,000).
Interpretation for (b): 

Banks with operations in districts where the credit flow is comparatively lower will need to step up lending to the priority sector so that they can reap the benefit of lower risk weight while banks with operations in districts where the credit flow is comparatively higher will be encouraged to maintain the lending momentum, else they risk attracting higher risk weights. 

 (2) Increase the lending to small and marginal farmers and weaker sections of the society:  

(a) Lending targets prescribed for “small and marginal farmers” (SMF) and “weaker sections” are being increased in a phased manner.

Comprehensive Picture & Possible Scenario:

  • For regional rural banks (RRBs) and small finance banks (SFBs), the PSL target is 75%. The overall PSL target of only urban co-operative banks will go up in a phased manner from the existing target of 40%  to 75% by March-end FY 2024.
  • As per the revised targets for lending to SMFs (within the overall PSL target), banks (excluding urban co-operative banks) will need to step up loans to this segment in a phased manner from 8% in FY 2021 to 10% by FY 2024.
  • Lending target for weaker sections for domestic commercial banks and small finance banks goes up in a phased manner from 10% in FY 2021 to 12 % in FY 2024.
  • Applicable target for lending by all domestic banks (other than Urban Co-op Banks) and foreign banks with more than 20 branches to the non-corporate farmers for FY 2020-21 will be 12.14% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-balance sheet exposure (CEOBE), whichever is higher. These banks should make all efforts to reach the level of 13.5% of ANBC (erstwhile target for direct lending to agriculture sector).
  • Banks (excluding urban co-operative banks) will need to step up loans to this segment in a phased manner from 8% in FY 2021 to 10% by FY 2024.
(b) Higher credit limit (i.e upto Rs. 5 crore) has been specified for Farmers Producers Organisations (FPOs) / Farmers Producers Companies (FPCs) undertaking farming with assured marketing of their produce at a pre-determined price.

(3) Credit boost to renewable energy: Loan limits for renewable energy have been doubled from Rs. 15 crore to Rs. 30 crore. For individual households, the renewable energy loan limit will be Rs. 10 lakh per borrower.
(4) Improvement of Health infrastructure: Credit limit for health infrastructure (including that under "Ayushman Bharat" has been doubled to Rs. 10 crore (Tier 2 to Tier 6 cities).

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