🏦 RBI Priority Sector Lending (PSL) Enhancements 2025 – Key Updates Explained

Updated: May 2025
Estimated Read Time: 4 mins

📌 Introduction

The Reserve Bank of India (RBI) has introduced major enhancements to its Priority Sector Lending (PSL) framework in 2025 to improve financial inclusion and channel credit to underserved areas. These updates focus on increasing accessibility to affordable finance, especially for weaker sections and key development sectors like housing and renewable energy.

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📊 What is Priority Sector Lending (PSL)?

Priority Sector Lending is a regulatory requirement under which banks must allocate a fixed percentage of their lending portfolio to specific sectors that are considered crucial for economic development and social equity. These include:

• Agriculture

• Micro, Small & Medium Enterprises (MSMEs)

• Housing

• Education

• Renewable energy

• Export credit

• Weaker sections of society

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🔑 RBI’s PSL Reforms – What’s New in 2025?

✅ 1. Increased Loan Limits for Key Sectors

To reflect rising costs and promote green development, RBI has enhanced the loan caps in two critical PSL categories:

• Housing Loans:

  • Metro cities: Limit increased from ₹35 lakh to ₹50 lakh

  • Non-metros: Limit raised from ₹25 lakh to ₹35 lakh

• 
  

• Renewable Energy Loans:

  • Limit increased from ₹10 lakh to ₹30 lakh per borrower

This aims to boost affordable housing supply and support the transition to clean energy infrastructure.

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✅ 2. Expanded Definition of ‘Weaker Sections’

The RBI has broadened the eligibility under the 'weaker sections' classification to ensure that more vulnerable individuals can benefit from formal credit access. Newly included groups are:

• Self-employed individuals with irregular income

• Street vendors

• Artisans and rural entrepreneurs

• Widows and differently-abled individuals

• Senior citizens without stable pensions

• Households below poverty line (BPL)

This move helps push inclusive lending practices and reduces dependency on informal credit channels.

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✅ 3. PSL Target Increased for Urban Cooperative Banks

To align Urban Cooperative Banks (UCBs) with mainstream financial inclusion goals, RBI has raised their PSL obligation:

• New Target: 60% of Adjusted Net Bank Credit (ANBC)

• Previous Target: 40% of ANBC

This change is expected to significantly increase the flow of credit to urban poor, small businesses, and housing initiatives in city areas.

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📈 Impact of PSL Enhancements in 2025