Banks will impose stricter supervision on priority sector loans purchased through ‘Securitization Notes’

In the case of eligible priority sector loans to self-help/joint liability groups, this limit will apply per member and not to the group as a whole.

The above standards may be specified in the internal policies of banks, per Reserve Bank of India (Priority Sector Lending – Targets and Classification) (Amendment) Directions, 2026.

These standards stem from the fact that the asset quality of PSL sourced banks in itself appears to be much better than those purchased through the securitization/direct allotment route.

Priority sector

Investments by banks in securitization bonds, which represent loans to different priority sector categories, excluding the ‘other’ category, are eligible for classification in the respective categories under certain conditions, depending on the underlying assets.

Investments by banks in securitization bonds with loans against gold jewelery sourced from NBFCs as the underlying asset do not qualify for priority sector status.

Bank credits to National Co-operative Development Corporation (NCDC) for on-lending to Co-operative Societies for purposes and activities as laid down in this principal direction shall be eligible for classification as PSL under the respective categories.

RBI said there are no loan related charges (including guarantee charges of credit guarantee schemes), and for this service charges/inspection charges may be levied on priority sector loans up to a maximum of ₹50,000.

In the case of eligible priority sector loans to self-help/joint liability groups, this limit will apply per member and not to the group as a whole.

Bank loans to Housing Finance Companies (HFCs), approved by the National Housing Bank for their refinancing, for on-lending for the purpose of purchase/construction/reconstruction of individual housing units or for clearing and rehabilitation of slum dwellers, are eligible for classification as PSL, with an aggregate loan limit of ₹20 lakh per borrower, under the ‘housing’ category.

Banks must maintain necessary credit records of the underlying portfolio and obtain certificates from external auditors from the HFCs confirming that no other bank has applied for any on-lending benefit in respect of such loans.

Published on January 19, 2026