RBI reduces the purpose of the priority sector for small financial banks to 60% of 75%

The RBI said that from the 2025-26 financial year, the extra component (35%) of PSL will be reduced to 20%, which reduces the total PSL target white as 60%of ANBC (adapted NetBank credit) or creditquival of exhibitions outside the balance sheet (CEOB) (CEOBE), higher. | Photocredit: Danish siddiqui

The Reserve Bank of India (RBI) has relaxed priority sector loans (PSL) standards for small financial banks (SFBs).

From the current financial year, PSL -Loingen for SFBs has been reduced to 60 percent of their loans of 75 percent earlier.

PSL includes loans to agriculture, MSMEs, export credit, education, housing, social infrastructure, renewable energy, weaker sections and other segments.

The RBI said that from the 2025-26 financial year, the extra component (35 percent) of PSL will be reduced to 20 percent, making the total PSL target white as 60 percent of ANBC (adapted net bank credit) or creditquival of exhibitions outside the balance (Ceobe), higher.

SFBs will continue to allocate 40 percent of their ANBC or Ceobe, depending on which higher, to different subsectors under PSL according to the existing PSL recipes, while the balance 20 percent can be assigned to one or more subsectors under the PSL where the bank has competitive advantage.

In March 2025, the RBI had issued revised PSL guidelines for banks, which improved limits for loans such as housing and education, even when the PSL objective for urban cooperative banks (UCBs) was reduced from 75 percent to 60 percent.

The revised guidelines, which are expected to facilitate better targeting of bank credit on the priority sectors of the economy, will be in force from 1 April 2025, the RBI then said.

Published on June 20, 2025