PSL norms need expansion to support Viksit Bharat@2047: SBI Research
New Delhi, July 7
Priority Sector Lending limits should be expanded and new categories should be added to ensure credit can meet evolving development priorities in line with Viksit Bharat@2047 goals, a report said on Tuesday.
New areas to be considered for PSL lending include ESG Financing, SDG Commitment, Infrastructure Lending, Financing to EV Ecosystem, etc, report from SBI Research said.
Banks are able to meet the 40 per cent overall target PSL (provisional FY26 estimate indicates overall PSL at 45 per cent of Adjusted Net Bank Credit) and a comprehensive review with the emergence of new areas in lending is necessary, the report said.
The research firm recommended raising current sectoral limits, such as for renewable energy from Rs 35 crore to Rs 100 crore; home loans to Rs 1 crore in metro centres and Rs 75 lakh elsewhere, with intermediated housing loans included under PSL.
Further, it proposed raising limits for education loans from Rs 25 lakh to Rs 50 lakh; social infrastructure loans to Rs 25 crore across all cities; and bank loans to NBFCs for on‑lending to be raised to Rs 25 lakh per borrower for agriculture and Rs 50 lakh for other sectors.
"All infrastructure loans may be given either priority sector status or be exempt from calculation of ANBC for PSL achievement in line with infra bonds raised towards funding of infrastructure and affordable housing," the report said.
It urged loans under all government sponsored schemes to be classified as Micro Enterprises and weaker sections irrespective of presence of Udyam Registration Number (URN).
Further, it suggested that a separate head 'Climate Sustainability Finance' may be created in PSL for activities which contribute to climate sustainability.
"Investments in green bonds/ESG bonds/sovereign bonds, etc. may be permitted for PSL classification," the report added.
RBI had devised a Priority Sector Lending (PSL) mechanism in 1972 to ensure credit flow to undeserving sectors and it has been revised periodically.
— IANS
Reader Comments
As a small business owner in the EV charging space, this is promising news. But why does RBI always announce things 'should be done' without clear timelines? Banks are still reluctant to lend to MSMEs despite all these PSL targets. Hope this time they actually follow through.
Interesting approach, but adding ESG and climate finance to PSL seems like a lot of complexity. Will small banks even have the expertise to evaluate these? Might end up as another box-ticking exercise. Should also consider simplifying existing categories first.
Education loan limit from Rs 25 lakh to Rs 50 lakh? That's a welcome move! Students from middle-class families like mine struggle so much. But reducing interest rates would help more than just raising limits. Still, good to see some focus on social infrastructure.
I'm all for Viksit Bharat, but are we just going to keep expanding PSL without checking actual impact? Last year ANBC was 45% but how many farmers actually got loans at 4% interest? Numbers look good on paper, ground reality remains different. Need better monitoring, not just new categories.
Love the 'Climate Sustainability Finance' idea! 🌿 Finally linking banking with environment. But how will banks verify green activities? Already see people misusing PSL for education loans... hope there are checks in place. Still, optimistic about this direction.
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