Why in the news
The RBI issued revised priority sector lending guidelines, effective 1 April 2025, to direct bank credit better toward agriculture, MSMEs, export credit, education, housing, social infrastructure and renewable energy.
Revised loan limits
| Segment | New position |
|---|
| Housing, city above 50 lakh | ₹50 lakh |
| Housing, city 10-50 lakh | ₹45 lakh |
| Housing, city below 10 lakh | ₹35 lakh |
| Home repair | ₹10-15 lakh (earlier ₹6-10 lakh) |
| Renewable power projects and utilities | ₹35 crore (earlier ₹30 crore) |
| Household renewable systems | Up to ₹10 lakh |
| Education | ₹25 lakh (earlier ₹20 lakh) |
| Artisans and women borrowers | ₹2 lakh (earlier ₹1 lakh) |
| Farm produce hypothecation | Individuals ₹90 lakh; corporate farmers ₹4 crore; FPOs ₹10 crore |
Other changes
- Transgender persons and Joint Liability Groups are now explicitly eligible.
- Urban co-operative banks: overall 60% of ANBC or CEOBSE, micro enterprises 7.5%, weaker sections 12%.
- Weighting: 125% for low per-capita credit districts, 90% for high ones.
Targets by bank type
| Item | Domestic and foreign banks (20+ branches) | RRBs | SFBs |
|---|
| Total priority sector | 40% | 75% | 75% |
| Agriculture | 18% | 18% | 18% |
| Micro enterprises | 7.5% | 7.5% | 7.5% |
| Weaker sections | 12% | 15% | 12% |
Background
- PSL is mandatory credit allocation to sectors that struggle to get credit.
- Banks can comply by direct lending, buying eligible bonds, or buying PSLCs from surplus banks.
- Shortfalls go into funds such as RIDF (managed by NABARD), or SIDBI, NHB and MUDRA funds.
- RIDF began in 1995-96, giving concessional loans to states for irrigation, rural roads, bridges, health centres and schools.
Exam angle
- Effective date: 1 April 2025.
- Foreign banks with under 20 branches: 40%, with up to 32% as export credit.
- Related terms: ANBC, CEOBSE, PSLC, RIDF.