The Reserve Bank of India has revised the guidelines on priority sector lending (PSL), which are to take effect from 1 April.

Replacing the 2020 norms, the new framework aims to target bank credit to the priority sectors of the economy in a better way.

The major changes in the new norms include higher loan limits for housing and renewable energy. Housing loans have been increased to provide greater financial access for individuals, particularly in urban and rural areas. 

The RBI has also broadened the purposes on which loans can be classified under 'renewable energy' category. The purpose is to encourage investments in clean energy.

The PSL target for urban cooperative banks (UCBs) has been revised to 60% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposures (CEOBSE), whichever is higher. This is expected to strengthen the roe of cooperative banks in supporting priority sectors.

The revised norms also expanded the list of eligible borrowers under the 'weaker sections' category. The existing cap on loans by UCBs to individual women beneficiaries has been removed, making credit more accessible to economically disadvantaged groups and women entrepreneurs.

Bank loans to the housing sector for priority sector classification have been prescribed in three categories -- Rs 50 lakh (centres with a population of 50 lakh and above), Rs 45 lakh (centres with a population of 10 lakh and above but below 50 lakh) and Rs 35 lakh (centres with a population below 10 lakh).

The maximum cost of dwelling units too has been specified in each case.

On renewable energy, the guidelines said bank loans up to a limit of Rs 35 crore to borrowers for renewable energy-based power generators and for renewable energy-based public utilities will be eligible for priority sector classification. For individual households, the loan limit will be Rs 10 lakh per borrower.

The categories under the priority sector include agriculture, MSME, export credit, education, housing, social infrastructure and renewable energy.

The new rules apply to all commercial banks, Regional Rural Banks (RRBs), Small Finance Banks (SFBs), Local Area Banks (LABs), and Primary (Urban) Co-operative Banks (UCBs), with the exception of Salary Earners’ Banks.