The Reserve Bank of India (“RBI”) has issued a press release dated September 4, 2020 (“Press Release”) communicating its comprehensive revision of the Priority Sector Lending Guidelines (“PSL Guidelines”). The revision has been affected vide the issuance of Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2020 (“Master Directions”) in exercise of the powers conferred to the RBI under Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949.

 Some of the salient features of the revised PSL guidelines are:

1. To address regional disparities in the flow of priority sector credit, higher weightage has been assigned to incremental priority sector credit in ‘identified districts’ where priority sector credit flow is comparatively low.
2. The targets prescribed for “small and marginal farmers” and “weaker sections” are being increased in a phased manner.
3. Higher credit limit has been specified for Farmers Producers Organisations (FPOs)/Farmers Producers Companies (FPCs) undertaking farming with assured marketing of their produce at a pre-determined price.
4. Loan limits for renewable energy have been increased (doubled).
5. For improvement of health infrastructure, credit limit for health infrastructure (including those under ‘Ayushman Bharat’) has been doubled.

The PSL Guidelines for Commercial Banks were last reviewed in 2015 and for Urban Co-Operative Banks in 2018. Vide the Master Directions, the RBI has revised the PSL Guidelines to enable better credit penetration to credit deficient areas and boost credit to renewable energy, and health infrastructure in the country.

The PSL Guidelines came into force on September 4, 2020.

Please find a copy of the Press Release here, and a copy of the Master Directions here.

This update has been contributed by Anurag Prasad (Associate).