Brief Context
In News The Reserve Bank of India (RBI) issued a comprehensive set of amendments to the Priority Sector Lending (PSL) – Targets and Classification Directions, 2025. About Priority Sector Lending It is an RBI-mandated policy that requires banks to direct a portion of their lending to key development sectors such as agriculture, education, housing, and small industries to support national growth. The latest revision enhances credit flow to key sectors such as Renewable Energy, Social Infrastructur
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Syllabus: GS3/Economy
In News
- The Reserve Bank of India (RBI) issued a comprehensive set of amendments to the Priority Sector Lending (PSL) – Targets and Classification Directions, 2025.
About Priority Sector Lending
- It is an RBI-mandated policy that requires banks to direct a portion of their lending to key development sectors such as agriculture, education, housing, and small industries to support national growth.
- The latest revision enhances credit flow to key sectors such as Renewable Energy, Social Infrastructure, Education, and MSMEs, and strengthens support for vulnerable groups.
Key Features of the PSL Directions, 2025
- Enhanced Compliance Framework: Banks must secure external auditor certification (or CAG-empanelled auditors for entities like NCDC) to verify PSL claims and prevent double-counting of exposures between originating banks and intermediaries like NBFCs or cooperatives.
- Revised targets for Small Finance Banks: The PSL requirement for Small Finance Banks (SFBs) has been rationalised from 75% to 60% of Adjusted Net Bank Credit (ANBC), reflecting a calibrated regulatory approach to balance inclusion goals with financial stability.
- Inclusion of NCDC for rural credit: Loans extended by banks to the National Cooperative Development Corporation for on-lending to cooperative societies are now formally recognised as Priority Sector Lending, strengthening cooperative-based rural and agricultural credit.
- Co-lending flexibility: Banks are permitted to enter co-lending arrangements with other financial intermediaries to meet PSL targets, promoting risk sharing and improved last-mile credit delivery.
- Export credit as PSL: Export credit provided to agriculture and MSMEs can be treated as PSL, aligning priority sector policy with export promotion and employment generation objectives.
Source :FE