Source: RBI
Context: Reserve Bank of India (RBI) revises Priority Sector Lending (PSL) norms
What is Priority Sector Lending (PSL)?
Priority Sector Lending (PSL) is a mandate by the Reserve Bank of India (RBI) to ensure that vulnerable sectors receive adequate credit. The purpose of PSL is to promote inclusive development by directing funds to sectors such as agriculture, MSMEs, education, housing, social infrastructure, renewable energy, and others.
Formalized in 1972, PSL ensures the flow of credit to creditworthy sectors that struggle to access formal financial institutions. Banks must allocate a portion of their Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposure (CEOBE), whichever is higher, towards PSL. The target is
- 40% for scheduled commercial banks and foreign banks with 20 or more branches
- 75% for Regional Rural Banks (RRBs) and Small Finance Banks (SFBs)
- 65% for Urban Cooperative Banks (UCBs) in FY 2024-25, increasing to 75% in FY 2025-26.
It applies to all commercial banks, including Regional Rural Banks (RRBs), Small Finance Banks (SFBs), Local Area Banks, and Primary (Urban) Cooperative Banks (UCBs).
