In a significant move, the Reserve Bank of India (RBI) has increased the eligibility cap on the home loans for Regional Rural Banks (RRBs) and Small Finance Banks (SFBs) to ₹35 lakh in metropolitan areas and ₹25 lakh in other centres. This is part of a broader strategy to place SFBs and RRBs on equal footing with other Scheduled Commercial Banks. The new regulation also classifies such loans as priority sector loans.
Revisions to the Priority Sector Lending Scheme
Alongside this, the RBI has also revised the criteria for Priority Sector Lending (PSL). The family income limit under PSL has now been set at ₹3 lakh per annum for Economically Weaker Sections (EWS) and ₹6 lakh per annum for Low-Income Groups (LIG). This aligns the income criteria with that specified under the Pradhan Mantri Awas Yojana.
The PSL targets sectors identified by the Government of India and the Reserve Bank of India as crucial for addressing the country’s basic necessities. These sectors are given priority over others, and banks are required to promote their growth with sufficient and timely credit.
RBI Guidelines for PSL
Under RBI’s guidelines for PSL, there are specific mandates for scheduled commercial banks:
1. 40% of the total net bank credit should be directed towards priority sector advances.
2. 10% of the priority sector advances or 10% of the total net bank credit, whichever is higher, should go to the weaker section.
3. 18% of the total net bank credit should be channelled to agricultural advances.
4. Within this 18% target for agriculture, 8% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposure must be prescribed for Small and Marginal Farmers.
5. 7.5% of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure should be allocated to Micro enterprises.
| Benefits of RBI Guidelines |
|---|
| Encourages growth in crucial sectors |
| Provides credit to weaker sections of society |
| Promotes agricultural advances and rural development |
| Supports small and micro enterprises |
Priority Sector Categories
The priority sectors that fall under these guidelines include Agriculture, Micro, Small and Medium Enterprises, Export Credit, Education, Housing, Social Infrastructure, Renewable Energy and Others. Each of these sectors plays a critical role in the country’s socio-economic growth, making them the focus of Priority Sector Lending. The initiative ensures that adequate credit is directed towards these sectors, encouraging their growth and contributing to the overall development of the nation.