RBI/FIDD/2024-25/128
Master Directions FIDD.CO.PSD.BC.13/04.09.001/2024-25

March 24, 2025

The Chairman / Managing Director/
Chief Executive Officer
All Commercial Banks including Regional Rural Banks,
Small Finance Banks, Local Area Banks and
Primary (Urban) Co-operative Banks other than Salary Earners’ Banks

Madam/Dear Sir,

Master Directions - Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2025

The Reserve Bank of India has, from time to time, issued a number of instructions/ guidelines to banks relating to Priority Sector Lending (PSL). The Master Directions enclosed incorporate the updated instructions/guidelines on the subject.

2. These Directions shall come into effect on April 01, 2025 and shall supersede the earlier Directions on the subject, namely, the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2020 (Ref. FIDD.CO.Plan.BC.5/04.09.01/2020-21) dated September 04, 2020 (updated from time to time). All loans eligible to be categorised as Priority Sector Lending under the erstwhile Master Directions on PSL dated September 04, 2020 (updated from time to time) shall continue to be eligible for such categorisation under these Directions, till maturity.

Yours faithfully,

(Nisha Nambiar)
Chief General Manager-in-Charge

Master Directions - Reserve Bank of India (Priority Sector Lending –
Targets and Classification) Directions, 2025

In exercise of the powers conferred by Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949, the Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified.

CHAPTER – I
PRELIMINARY

1. Short Title and Commencement

1.1 These Directions shall be called the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2025.

1.2 These Directions shall come into effect on April 01, 2025, and shall supersede the earlier Directions on the subject, namely, the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2020 (Ref. FIDD.CO. Plan.BC.5/04.09.01/2020-21) dated September 04, 2020 (updated from time to time).

2. Applicability

The provisions of these Directions shall, unless otherwise provided, apply to every Commercial Bank [including Regional Rural Bank (RRB), Small Finance Bank (SFB), Local Area Bank (LAB)] and Primary (Urban) Co-operative Bank (UCB) other than Salary Earners’ Bank.

3. Purpose

These Directions are issued with a view to delineating a framework for ensuring adequate flow of credit from the banking system to the sectors of the economy which are crucial for their contribution to socio-economic development, with focus on specific segments whose credit needs remain underserved despite being credit worthy.

4. Definitions/Clarifications

4.1 In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below:

1. Allied activities i.e. activities allied to agriculture shall include dairy, fisheries, animal husbandry, poultry, bee-keeping, sericulture and similar activities.
2. Non-Corporate Farmers (NCF) shall include individual farmers including Small and Marginal Farmers¹ (SMFs), proprietorship firms of farmers directly engaged in agriculture and allied activities, and Self-Help Groups (SHGs) or Joint Liability Groups (JLGs) i.e., group of individual farmers, provided banks maintain disaggregated data of such loans.
3. “On-lending” means loans sanctioned by banks to eligible intermediaries for onward lending. Such loans, extended for creation of priority sector assets and which remain deployed in such assets, will be eligible for classification under PSL.

4.2 All other expressions, unless defined herein, shall have the same meaning as has been assigned to them under the Banking Regulation Act, 1949 or the Reserve Bank of India Act, 1934 or any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be.

4.3 All loans categorised as Priority Sector Lending (PSL) under the erstwhile Master Directions on PSL dated September 04, 2020 (updated as on June 21, 2024) shall continue to be eligible for such categorisation under these Directions till maturity.

CHAPTER – II
CATEGORIES AND TARGETS UNDER PRIORITY SECTOR

5. Categories under Priority Sector

The categories under priority sector are as follows:

1. Agriculture
2. Micro, Small and Medium Enterprises
3. Export Credit
4. Education
5. Housing
6. Social Infrastructure
7. Renewable Energy
8. Others

The details of eligible activities under the above categories are specified in Chapter III.

6. Computation of Adjusted Net Bank Credit (ANBC)

6.1 For the purpose of priority sector lending, ANBC shall be computed as follows:

6.2 For the purpose of calculation of Credit Equivalent of Off-Balance Sheet Exposures (CEOBSE), banks shall be guided by the circular on ‘Large Exposures Framework’ issued by Department of Regulation, RBI vide DBR.No.BP.BC.43/21.01.003/2018-19 dated June 03, 2019 and as updated from time to time. UCBs shall be guided by the relevant provisions of the Master Circular dated April 20, 2023 on ‘Prudential Norms on Capital Adequacy - Primary (Urban) Co-operative Banks (UCBs)’ issued by Reserve Bank of India.

6.3 SFBs shall be further guided by Para 6.5 (ii to vii) of the Operating Guidelines for Small Finance Banks issued by Department of Regulation (RBI/2016-17/81 DBR.NBD. No.26/16.13.218/2016-17 dated October 06, 2016), pertaining to treatment of grandfathered loans, for computation of ANBC.

6.4 While calculating Net Bank Credit as above, if banks subtract prudential write off at Corporate/Head Office level, it shall be ensured that the credit to priority sector and all sub-sectors so written off shall also be subtracted category wise from priority sector target and sub-target achievement. Investments or any other items which are treated as eligible for classification under priority sector target/sub-target achievement, shall also form part of Adjusted Net Bank Credit.

6.5 All banks shall adhere to the respective licencing and operating guidelines issued by the Department of Regulation, RBI as updated from time to time.

7. Targets/Sub-targets for Priority sector

7.1 The targets and sub-targets set under priority sector lending, to be computed on the basis of the ANBC/CEOBSE² as applicable as on the corresponding date of the preceding year, are as below:

7.2 The priority sector lending targets for UCBs shall be as follows:

8. Adjustments for weights in PSL Achievement

8.1 To address regional disparities in the flow of priority sector credit at the district level, it was decided to rank districts on the basis of per capita credit flow to priority sector and build an incentive framework for districts with comparatively lower flow of credit and a dis-incentive framework for districts with comparatively higher flow of priority sector credit. With effect from FY 2024-25, a higher weight (125%) shall be assigned to the incremental priority sector credit in the identified districts where the credit flow is comparatively lower (per capita PSL less than Rs.9,000), and a lower weight (90%) will be assigned for incremental priority sector credit in the identified districts where the credit flow is comparatively higher (per capita PSL greater than Rs.42,000). The list of both categories of districts is given in Annexes IA and IB and will be valid up to FY 2026-27, subject to a review thereafter. The districts other than those mentioned in Annexes IA and IB will continue to have normal weightage of 100%.

8.2 The banks shall continue to report the actual outstanding amount in Quarterly Priority Sector Advances (QPSA) returns as hitherto. Adjustments for weights to incremental PSL credit will be done by RBI, based on reporting of district wise credit flow to FIDD, CO through the ADEPT database. RRBs, UCBs, LABs and foreign banks (including Wholly Owned Subsidiaries) would be exempted from adjustments of weights in PSL achievement due to their currently limited area of operation/catering to a niche segment.

CHAPTER – III
DESCRIPTION OF ELIGIBLE CATEGORIES UNDER PRIORITY SECTOR

9. Agriculture

The lending to agriculture sector will include Farm Credit (Agriculture and Allied Activities), lending for Agriculture Infrastructure and Ancillary Activities.

9.1 Farm Credit

A. Farm Credit - Individual farmers

This category comprises of loans to individual farmers [including Self Help Groups (SHGs) or Joint Liability Groups (JLGs) i.e., groups of individual farmers, provided banks maintain disaggregated data of such loans] and proprietorship firms of farmers, directly engaged in agriculture and allied activities. Such loans will include:

1. Crop loans including loans for traditional/non-traditional plantations, horticulture and allied activities
2. Medium and long-term loans for agriculture and allied activities (e.g. purchase of agricultural implements and machinery and developmental loans for allied activities)
3. Loans for pre and post-harvest activities viz., spraying, harvesting, grading and transporting of own farm produce
4. Loans to distressed farmers indebted to non-institutional lenders
5. Loans under the Kisan Credit Card Scheme
6. Loans to small and marginal farmers (SMFs) for purchase of land for agricultural purposes
7. Loans against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months subject to a limit up to Rs.90 lakh against Negotiable Warehouse Receipt (NWRs)/Electronic Negotiable Warehouse Receipt (eNWRs) and up to Rs.60 lakh against warehouse receipts other than NWRs/eNWRs
8. Loans to farmers for installation of stand-alone solar agriculture pumps and for solarisation of grid connected agriculture pumps
9. Loans to farmers for installation of solar power plants on barren/fallow land or in stilt fashion on agriculture land owned by farmer

B. Farm Credit - Corporate farmers, Farmer Producer Organisations/ Companies (FPOs)/(FPCs) of Individual Farmers, Partnership firms and Co-operatives of farmers engaged in Agriculture and Allied Activities

(a) Loans for the following activities, subject to an aggregate limit of Rs.4 crore per borrowing entity, will be eligible:

1. Crop loans to farmers which will include traditional/non-traditional plantations and horticulture and loans for allied activities
2. Medium and long-term loans for agriculture and allied activities (e.g., purchase of agricultural implements, technological solutions, machinery and developmental loans for allied activities)
3. Loans for pre and post-harvest activities viz., spraying, harvesting, grading and transporting of their own farm produce

(b) Loans up to Rs.4 crore against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months against NWRs/eNWRs and up to Rs.2.5 crore against warehouse receipts other than NWRs/eNWRs

(c) Loans up to Rs.10 crore per borrowing entity to FPOs/FPCs undertaking farming with assured marketing of their produce at a pre-determined price

(d) Loans up to Rs.10 crore for purchase of the produce of members directly engaged in agriculture and allied activities

Note: UCBs are not permitted to lend to co-operatives of farmers.

9.2 Agriculture Infrastructure

Loans for agriculture infrastructure will be subject to an aggregate sanctioned limit of Rs.100 crore per borrower from the banking system. List of activities is furnished in Annex II (Item I).

9.3 Ancillary Services

The following shall be eligible to be classified in this category:

1. Loans specified in Annex II (Item 2)
2. Loans up to Rs.50 crore to Start-ups³ that are engaged in agriculture and allied services
3. Loans for Food and Agro-processing up to an aggregate sanctioned limit of Rs.100 crore per borrower from the banking system (eligible activities as given in Annex III)
4. Export credit to the agriculture sector, including pre-shipment and post-shipment export credit (excluding off-balance sheet items) as defined in the Master Circular on Rupee/Foreign Currency Export Credit and Customer Service to Exporters issued vide DBR No.DIR.BC.14/04.02.002/2015-16 dated July 1, 2015 and updated from time to time
5. Outstanding deposits under RIDF and other eligible funds with NABARD on account of priority sector shortfall

9.4 Eligibility criteria for categorization as lending to Small and Marginal Farmers (SMFs)

For the purpose of computation of achievement of the sub-target, SMFs will include the following:

1. Farmers with landholding of up to 1 hectare (Marginal Farmers)
2. Farmers with a landholding of more than 1 hectare and up to 2 hectares (Small Farmers)
3. Landless agricultural labourers, tenant farmers, oral lessees and share-croppers whose share of landholding is within the limits prescribed for SMFs
4. Self Help Groups (SHGs) or Joint Liability Groups (JLGs), i.e., groups of individual SMFs directly engaged in agriculture and allied activities, provided banks maintain disaggregated data of such loans
5. Loans up to Rs.2.5 lakh to individuals solely engaged in allied activities without any accompanying land holding criteria
6. Loans to FPOs/FPCs of individual farmers and co-operatives of farmers directly engaged in agriculture and allied activities where the land-holding share of SMFs is not less than 75 per cent, subject to loan limits prescribed in para 9.1 (B)

Note: UCBs are not permitted to lend to co-operatives of farmers.

9.5 Lending by banks to NBFCs and MFIs for on-lending in agriculture

1. Bank credit extended to registered NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised SRO for the sector, for on-lending to individuals and also to members of SHGs/JLGs will be eligible for categorisation as priority sector advance under respective categories of agriculture subject to conditions specified in para 22.
2. Bank credit to registered NBFCs (other than MFIs) towards on-lending for ‘term lending’ component under agriculture will be eligible for PSL classification up to Rs.10 lakh per borrower subject to conditions specified in para 23 and 25.

Note: The provisions of para 9.5 shall not be applicable to RRBs, UCBs, SFBs and LABs.

10. Micro, Small and Medium Enterprises (MSMEs)

1. The definition of MSMEs shall be as given in the Master Direction – Lending to Micro, Small & Medium Enterprises (MSME) Sector FIDD.MSME & NFS.12/06.02.31/2017-18 dated July 24, 2017 as updated from time to time.
2. All bank loans to MSMEs shall qualify for classification under priority sector lending.
3. Loans up to Rs.50 crore to Start-ups⁴, that conform to the definition of MSME, shall also be eligible to be classified under this category.

10.1 Factoring Transactions

1. ‘With recourse’ factoring transactions by banks which carry out the business of factoring departmentally wherever the ‘assignor’ is a Micro, Small or Medium Enterprise would be eligible for classification under MSME category on the reporting dates.
2. Factoring transactions pertaining to MSMEs taking place through the Trade Receivables Discounting System (TReDS) shall also be eligible for classification under priority sector.

Note: The provisions of para 10.1 are not applicable to RRBs and UCBs

10.2 Other Loans eligible to be classified under PSL in the MSME category

These include:

1. All loans to units in the Khadi and Village Industries sector, which shall be categorised as lending to micro enterprises.
2. Loans to entities involved in assisting the decentralized sector in the supply of inputs and marketing of output of artisans, village and cottage industries.
3. Loans to co-operatives of producers in the decentralized sector viz., artisans, village and cottage industries (not applicable to UCBs).
4. Export credit to the MSME sector, including pre-shipment and post-shipment export credit (excluding off-balance sheet items) as defined in the Master Circular on Rupee/Foreign Currency Export Credit and Customer Service to Exporters, issued vide DBR No.DIR.BC.14/04.02.002/2015-16 dated July 1, 2015 and updated from time to time.
5. Loans by banks to NBFC-MFIs and other MFIs (Societies, Trusts, etc.) which are members of RBI recognised SRO for the sector, for on-lending to the MSME sector, borrowers being individuals and members of SHGs/ JLGs as per the conditions specified in paragraph 22 of these Master Directions (not applicable to RRBs, SFBs and UCBs)
6. Loans to registered NBFCs (other than MFIs) for on-lending to micro and small enterprises up to Rs.20 lakh per borrower as per conditions specified in para 23 of these Master Directions (not applicable to RRBs, SFBs and UCBs)
7. Overdraft to Pradhan Mantri Jan-Dhan Yojana (PMJDY) account holders as per limits and conditions prescribed by Department of Financial Services, Ministry of Finance from time to time, which shall be categorised as lending to Micro Enterprises.
8. Outstanding deposits with SIDBI and MUDRA Ltd. on account of priority sector shortfall.

11. Export Credit

1. Export credit includes pre-shipment and post-shipment export credit (excluding off-balance sheet items) as defined in Master Circular on Rupee / Foreign Currency Export Credit and Customer Service to Exporters, issued vide DBR No.DIR.BC.14/04.02.002/2015-16 dated July 1, 2015 and updated from time to time.
2. Export credit to agriculture and MSME shall be eligible for classification as PSL in the respective categories.
3. Export Credit (other than that classified under agriculture and MSME) shall be eligible for classification as priority sector lending as per the following table:

Note: The provisions of para 11 are not applicable to RRBs and LABs.

12. Education

Loans to individuals for educational purposes, including vocational courses, not exceeding Rs.25 lakh will be considered as eligible for priority sector classification.

13. Housing

13.1. Bank loans to Housing sector as per limits prescribed below are eligible for priority sector classification:

i. Loans to individuals for purchase/construction of a dwelling unit per family subject to the following limits:

ii. Housing loans to banks’ own employees will not be eligible for classification under the priority sector.

iii. Housing loans which are backed by long term bonds shall not be classified under priority sector, as they are exempted from inclusion in ANBC. Investments made by UCBs in bonds issued by NHB/HUDCO on or after April 1, 2007 shall not be eligible for classification under priority sector.

13.2. Loans for repairs to damaged dwelling units shall be eligible for priority sector classification subject to the following limits:

13.3. Bank loans to any governmental agency for construction of dwelling units or for slum clearance and rehabilitation of slum dwellers subject to dwelling units with carpet area of not more than 60 sq.m.

13.4. Bank loans for affordable housing projects using at least 50% of FAR/FSI for dwelling units with carpet area of not more than 60 sq.m.

13.5. Outstanding deposits with NHB on account of priority sector shortfall

14. Social Infrastructure

Bank loans to social infrastructure sector as per limits prescribed below are eligible for priority sector classification.

14.1. Loans up to a limit of Rs.8 crore per borrower for setting up schools, drinking water facilities and sanitation facilities including construction/refurbishment of household toilets and water improvements at household level, etc.

14.2. Loans up to a limit of Rs.12 crore per borrower for building health care facilities in Tier II to Tier VI centres. In case of UCBs, the equivalent centres are those in Category ‘D’⁵.

14.3. Loans (other than by RRBs, UCBs and SFBs) to MFIs extended for on-lending to individuals and also to members of SHGs/JLGs for water and sanitation facilities subject to the criteria laid down in paragraph 22 of these Master Directions.

15. Renewable Energy

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, viz., street lighting systems, remote village electrification etc., will be eligible for priority sector classification. For individual households, the loan limit will be Rs.10 lakh per borrower.

16. Others

The following loans up to the prescribed limits are eligible for priority sector classification:

1. Loans provided directly by banks to individuals and individual members of SHGs/JLGs satisfying the criteria as prescribed in Master Direction on Regulatory Framework for Microfinance Loans Directions, dated March 14, 2022
2. Loans not exceeding Rs.2.00 lakh provided by banks to SHG/JLG for activities other than agriculture or MSME, viz., loans for meeting social needs, construction or repair of house, construction of toilets or any viable common activity started by SHGs
3. Loans to distressed persons [other than distressed farmers indebted to non-institutional lenders] not exceeding Rs.1.00 lakh per borrower to prepay their debt to non-institutional lenders
4. Loans sanctioned to State Sponsored Organisations for Scheduled Castes/ Scheduled Tribes for the specific purpose of purchase and supply of inputs and/or the marketing of the outputs of the beneficiaries of these organisations
5. Loans up to Rs.50 crore to Start-ups⁶, that are engaged in activities other than agriculture or MSME

17. Weaker Sections

17.1 Priority sector loans to the following borrowers will be considered as lending to Weaker Sections (overlapping category):

17.2 Overdraft availed by PMJDY account holders as per limits and conditions prescribed by Department of Financial Services, Ministry of Finance from time to time may be classified under loans to Weaker Sections.

17.3 In States, where one of the minority communities notified is, in fact, in majority, item (xiii) will cover only the other notified minorities. These States/Union Territories are Punjab, Meghalaya, Mizoram, Nagaland, Lakshadweep and Jammu & Kashmir.

CHAPTER IV
MISCELLANEOUS

18. Investments by banks in Securitisation Notes

Investments by banks in ‘Securitisation Notes’, representing loans to various priority sector categories, except 'others' category, are eligible for classification under the respective categories depending on the underlying assets, subject to the following conditions:

1. The assets are originated by banks and financial institutions and are eligible to be classified as priority sector advances prior to securitisation and fulfil the Reserve Bank of India guidelines on ‘Securitisation of Standard Assets’ issued vide Master Directions DOR.STR.REC.53/21.04.177/2021-22 dated September 24, 2021 as updated from time to time.
2. Investment by banks in securitisation notes with loans against gold jewellery originated by NBFCs as underlying, are not eligible for priority sector status.

Note: The provisions of para 18 are not applicable to RRBs and UCBs

19. Transfer of Assets through Direct Assignment/Outright purchase

Assignment/outright purchase of pool of assets by banks representing loans under various priority sector categories, except the ‘others’ category, will be eligible for classification under the respective categories, subject to the following conditions:

1. The assets are originated by banks and financial institutions and are eligible to be classified as priority sector advances prior to the purchase and fulfil the Reserve Bank of India guidelines on ‘Transfer of Loan Exposures’ issued vide Master Directions DOR.STR.REC.51/21.04.048/2021-22 dated September 24, 2021 as updated from time to time.
2. Banks shall report the outstanding amount actually disbursed to priority sector borrowers and not the premium embedded amount paid to the seller.
3. Loans against gold jewellery acquired by banks from NBFCs are not eligible for priority sector status.

Note: The provisions of para 19 are not applicable to RRBs and UCBs.

20. Inter Bank Participation Certificates (IBPCs)

1. IBPCs bought by banks, on a risk sharing basis, are eligible for classification under the respective priority sector categories, provided the underlying assets are eligible to be classified under the respective categories and the banks fulfil the Reserve Bank of India guidelines on IBPCs issued vide circular DBOD.No.BP.BC.57/62-88 dated December 31, 1988 and updated from time to time.
2. IBPCs bought by banks on risk sharing basis relating to ‘Export Credit’ as per Para 11, shall be classified from purchasing bank’s perspective for priority sector categorization. However, in such a scenario, the issuing bank shall certify that the underlying asset is ‘Export Credit’, in addition to the due diligence required to be undertaken by the issuing and the purchasing banks as per guidelines in this regard.

Note: The provisions of para 20 are not applicable to UCBs.

21. Priority Sector Lending Certificates (PSLCs)

Banks are permitted to purchase/sell PSLCs in terms of Reserve Bank of India guidelines on Priority Sector Lending Certificates issued vide Circular FIDD.CO.Plan.BC.23/04.09.001/2015-16 dated April 7, 2016 read with Circular FIDD.CO.PSD.BC.No.12/04.09.001/2024-25 dated March 24, 2025. The net nominal value of the PSLCs issued and purchased will be eligible for classification under the respective priority sector categories provided the underlying assets originated by banks are eligible to be classified as priority sector advances. SFBs shall further be guided by the terms and conditions specified in Para 1.9 of DBR circular No. DBR.NBD.26/16.13.218/2016-17 dated October 6, 2016 on credit risk transfer and portfolio sales/purchases.

22. Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for On-Lending

Loans disbursed by banks to MFIs under para 22 (i) and 22 (ii) below are eligible for categorisation as priority sector advances under respective categories viz., Agriculture, MSME, Social Infrastructure and Others, provided the MFIs adhere to the conditions prescribed in Chapter II (xx) and Chapter VIII of Master Directions DNBR PD.007/03.10.119/2016-17 and Chapter II (xx) and Chapter IX of Master Directions DNBR PD.008/03.10.119/ 2016-17 dated September 1, 2016, as updated from time to time.

(i) Loans by banks other than SFBs to registered NBFC-MFIs and other MFIs (Societies, Trusts, etc.) which are members of RBI recognised Self-Regulatory Organisation (SRO) for the sector, for on-lending to individuals and also to members of SHGs/JLGs

(ii) Loans by SFBs to registered NBFC-MFIs and other MFIs (Societies, Trusts, etc.) which are members of RBI recognised SRO of the sector, and which have a ‘gross loan portfolio’ (GLP) of up to Rs.500 crore as on March 31 of the previous year, for the purpose of on-lending to individuals⁷. In case the GLP of the NBFC-MFIs/other MFIs exceeds the stipulated limit at a later date, all priority sector loans created prior to exceeding the GLP limit will continue to be classified by the SFBs as PSL till repayment/maturity, whichever is earlier. Bank credit as above, up to an overall limit of 10% of an individual bank’s total priority sector lending of the previous financial year, is eligible for PSL classification. Banks shall determine adherence to the prescribed cap by averaging the eligible portfolio under on-lending mechanism across four quarters of the current financial year.

Note: The provisions of para 22 are not applicable to RRBs, UCBs and LABs.

23. Bank loans to NBFCs for On-Lending

Bank credit to registered NBFCs (other than MFIs) for on-lending will be eligible for classification as priority sector lending under the respective categories subject to the following conditions:

1. Agriculture: Up to Rs.10 lakh per borrower in respect of ‘term lending’ component under Agriculture
2. Micro & Small enterprises: Up to Rs.20 lakh per borrower

provided banks maintain disaggregated data of such loans in the portfolio.

Note: The provisions of para 23 are not applicable to RRBs, UCBs, SFBs and LABs.

24. Bank loans to HFCs for On-Lending

Bank credit to Housing Finance Companies (HFCs), approved by NHB for their refinance, for on-lending for the purpose of purchase/construction/reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to an aggregate loan limit of Rs.20 lakh per borrower under ‘Housing’ category. Banks shall maintain necessary borrower-wise details of the underlying portfolio.

Note: The provisions of para 24 are not applicable to RRBs, SFBs and LABs.

25. Cap on On-Lending

Bank credit to NBFCs (including HFCs) for on-lending as applicable in para 23 and 24 above, will be eligible for PSL classification up to an overall limit of 5% of individual bank’s total priority sector lending of the previous financial year. Banks shall determine adherence to the prescribed cap by averaging the eligible portfolio under on-lending mechanism across four quarters of the current financial year.

26. Co-lending by Banks and NBFCs to priority sector

Scheduled Commercial Banks are permitted to co-lend with registered Non-Banking Financial Companies (including Housing Finance Companies) for lending to the priority sector as per guidelines issued vide circular FIDD.CO.Plan.BC.No.8/04.09.01/2020-21 dated November 5, 2020. Loans extended as per guidelines on co-origination, issued vide circular No. FIDD.CO.Plan.BC/08/04.09.01/2018-19 dated September 21, 2018, would continue to be eligible for priority sector classification till repayment/maturity whichever is earlier.

Note: The provisions of para 26 are not applicable to RRBs, UCBs, SFBs and LABs.

27. PSL eligibility for COVID-19 measures

Outstanding loans extended under policy measures to mitigate the financial impact of COVID-19, as detailed in Annex-IV, shall be eligible for classification as priority sector lending.

28. Monitoring of Priority Sector Lending Targets

1. To ensure continuous flow of credit to priority sectors, the compliance of banks will be monitored on a calendar quarter basis.
2. The data on priority sector advances shall be furnished by banks at quarterly and annual intervals as per the respective reporting format, within fifteen days and one month, respectively from the end of each quarter and financial year.
3. In respect of RRBs, the data on priority sector advances, in the above format, shall be furnished to NABARD at quarterly and annual intervals.
4. UCBs shall be guided by Master Direction – Reserve Bank of India (Filing of Supervisory Returns) Directions – 2024 dated February 27, 2024, as updated from time to time, as regards submission of data on priority sector advances.

29. Non-achievement of Priority Sector Targets

(i) All banks (excluding UCBs under all-inclusive directions) reporting shortfall in priority sector lending vis-à-vis the prescribed target/sub-targets shall be allocated amounts for contribution to the Rural Infrastructure Development Fund (RIDF) and other funds with NABARD/NHB/SIDBI/MUDRA Ltd., as decided by the Reserve Bank from time to time. Further, the terms and conditions of the funds shall be as decided by Reserve Bank of India.

(ii) While computing priority sector target achievement, shortfall/excess lending for each quarter will be monitored separately. A simple average of all quarters will be arrived at and considered for computation of overall shortfall/excess at the end of the year. The same method will be followed for calculating the achievement of priority sector sub-targets. (Illustration given in Annex V).

(iii) The interest rates payable to banks for their contribution to RIDF and other funds shall be as follows:

Further, in case of no shortfall in overall PSL target but shortfall in any sub-target, interest rate of Bank Rate minus 2 percentage points will apply.

(iv) The mis-classifications in PSL, if any, identified by the Reserve Bank’s Department of Supervision (DoS) (NABARD in respect of RRBs) will be adjusted from the PSL achievement of the relevant year, to which the amount of misclassification pertains, and shortfall will be allocated to various funds in the subsequent years.

(v) Non-achievement of priority sector targets and sub-targets will be taken into account while granting regulatory clearances/approvals for various purposes.

30. Common guidelines for Priority Sector Loans

Banks shall also comply with the following common guidelines for all categories of priority sector advances.

1. Rate of interest: The rates of interest charged on loans shall be in accordance with the Master Direction – Reserve Bank of India (Interest Rate on Advances) Directions, 2016, as amended from time to time.
2. Service charges: No loan related and ad hoc service charges/inspection charges shall be levied on priority sector loans up to Rs.50,000. In the case of eligible priority sector loans to SHGs/JLGs, this limit will be applicable per member and not to the group as a whole.
3. Record of Receipt, Sanction/Rejection/Disbursement: Record shall be maintained by the bank of the date of receipt, sanction, disbursement, rejection with reasons thereof, etc.
4. Acknowledgement of loan applications: Banks shall provide acknowledgement of receipt of applications for priority sector loans. Bank Boards shall prescribe the time limit within which the bank communicates its decision in writing to the applicants.
5. Banks shall ensure that loans categorised as priority sector lending are granted for approved purposes and the end use is monitored, by putting in place proper internal systems and controls.
6. Each priority sector loan shall be classified only in any one of the eight identified categories specified in para 5 of these Master Directions.

List of Districts with comparatively high PSL credit

List of Districts with comparatively low PSL credit

Indicative list of eligible activities under Agriculture Infrastructure and Ancillary activities

Indicative list of Permissible Activities under Food Processing Sector as shared by Ministry of Food Processing Industries (MoFPI)

1. Cleaning, Air Cooling (Field Heat Removal), Sorting, Grading/Sizing, Packaging, Warehousing, Distribution of Fruits & Vegetables etc.
2. Transportation including in refrigerated van/Cold Chain infrastructure system Packaging and storage including techniques like Silo, Hermetic storage; pest management.
3. Storage at low temperature/Cold Storage/Modified/Controlled Atmosphere packaging, Refrigeration/Chilling etc.
4. Primary and/or Minimal Processing of F&V: - Blanching (Vegetables), Peeling, Cutting, Storage, Distribution at Low temperature, vacuum packaging etc.
5. Sun Drying and Mechanical Drying: - Solar Drying, Hot air drying, Dehydration, hybrid drying, fluidized bed drying, refractive window drying, drum drying, radio frequency drying, Lyophilisation (Freeze Drying), Vacuum Drying, Spray Drying, De-hydro-freezing etc.
6. Preservation through various methods; both traditional and modern.
7. Frozen Products: Individually Quick Frozen (10F) of Fruit, Vegetables, Meat, Fish, Sea Foods etc.
8. Milk and Milk products processing, including their transportation, packaging and storage.
9. Canning of Fruit, Vegetables including Mushrooms, Meat, Fish, crustaceans, molluscs, other Sea Foods etc.
10. Milling Grains, Legumes & Pulses, Preparation of their by-products such as Bran Oil, Cattle Feed/Poultry feed etc.
11. Processing of F&V into different products such as juices, concentrates, sauces, jam, jellies, marmalades, Chips, Flakes, Powders etc.
12. Processing of Grains & Pulses, Fish, Meat, Poultry, Sea Foods, Egg etc. into their different products including extruded, popped, puffed and flaked products and their packaging and storage including fumigation, Smoking etc.
13. Oil seed Extraction- Rendering, Pressing, Hydrogenation, Refining with Extraction, Filling/packaging etc.
14. Spices, Seasoning and Condiments - Grinding, Crushing, Milling, Sieving, Mixing, Blending, Roasting, Packaging, Storage, Distribution.
15. Production of fermented Products and Alcoholic- Wines, Vinegar, Milk products, Prebiotics, Probiotics etc.
16. Production of beverages - Juices, RTS, Nectar, Squash, Cordial, Syrups/Sherbets, Soups, Carbonated Beverages etc.
17. Production of Cocoa, Coffee, Chicory and Tea Products; including Cocoa Butter, Cocoa Powder, Chocolates, wafers etc.
18. Production of Bakery and Confectionary Products - Biscuits, Bread, Cakes, Cookies, Toffee etc.
19. Production of Jaggery, Sugar, Khandasari etc from Sugarcane, Beet, Palm etc.
20. Production of apiary products (honey processing; both natural and artificial honey).
21. Production of Starch and Starch Products - Sago, Tapioca, Corn, Noodles, Macroni, Vermicelli etc,
22. Slaughtering of animals/ruminants/birds etc. and their processing.
23. Nuts Processing; coconut-based product processing such as water, nuts etc.
24. Processing of other products such as Instant Mixes, Ready to Eat (RTE) retort-based products, ready to cook and Beverages etc.
25. Nutraceutical products/functional foods/fortified food/enriched food preparation.
26. Production of Organic food products.
27. Processing of algal and fungal products (eg Spirulina, Mushrooms etc), including packaging and enhancement of shelf life.
28. Processing plantation crops, packaging, storage and enhancement of shelf life.
29. Production of food grade packaging material such as laminates, tetra packs, bottles, tin containers etc.

COVID-19 measures - PSL treatment

To mitigate the financial impact of COVID-19 related disruptions, RBI had taken several policy measures to ease the flow of credit to needy segments. Priority sector classification shall be available to outstanding credit extended under the measures specified below:

1. In terms of press release: 2021-2022/177 dated May 7, 2021, an on-tap liquidity window of Rs.50,000 crore with tenors of up to three years at the repo rate till March 31, 2022 was opened to boost provision of immediate liquidity for ramping up COVID-related healthcare infrastructure and services in the country. Banks were expected to create a COVID loan book under the scheme. Banks were advised to deliver these loans to borrowers directly or through intermediary financial entities regulated by the RBI. These loans will continue to be classified as priority sector lending till repayment or maturity, whichever is earlier. Banks which deployed their own resources without availing funds from the RBI under the scheme for lending to the specified segments mentioned above, are also eligible for the incentives stipulated as above.
2. In terms of press release: 2021-2022/323 dated June 4, 2021, a separate liquidity window of Rs.15,000 crore with tenors of up to three years at the repo rate till March 31, 2022 was opened for certain contact-intensive sectors i.e., hotels and restaurants; tourism - travel agents, tour operators and adventure/heritage facilities; aviation ancillary services - ground handling and supply chain; and other services that include private bus operators, car repair services, rent-a-car service providers, event/conference organisers, spa clinics, and beauty parlours/saloons. Banks were expected to create a separate COVID loan book under the scheme. Banks desirous of deploying their own resources without availing funds from the RBI under the scheme for lending to the specified segments mentioned above, were also eligible for this incentive.

Priority Sector achievement - Calculation of shortfall/excess

Illustration:

In the example given in Table - 1, the bank has overall shortfall of Rs.2063 crore at the end of the financial year. In Table – 2, the bank has overall excess of Rs.2293 crore at the end of the financial year.

The adjustments due to weightage on incremental credit in identified districts as per para 8, will be as per the data submitted by banks in the Automated Data Extraction Project (ADEPT).

The same method will be followed for calculating the achievement of quarterly and yearly priority sector sub-targets.

Note: The computation of priority sector targets/sub-targets achievement will be based on the ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposures, whichever is higher, as at the corresponding date of the preceding year.

List of Circulars Consolidated

² (i) Contingent liabilities/off-balance sheet items do not form part of priority sector achievement. However, foreign banks with less than 20 branches have an option to reckon the CEOBSE extended to borrowers for eligible priority sector activities for achievement of priority sector target, subject to the condition that the CEOBSE (both priority sector and non-priority sector excluding interbank exposure) shall be added to the ANBC in the denominator for computation of PSL targets.

(ii) Off-balance sheet interbank exposures are excluded for computing CEOBSE for the priority sector targets.

³ As defined by Ministry of Commerce and Industry, Govt. of India

⁴ As defined by Ministry of Commerce and Industry, Govt. of India

⁵ Annex-I of Master Circular on Area of Operation, Branch Authorisation Policy, Opening/Up-gradation of Extension Counters, ATMs and Shifting/Splitting/Closure of Offices (DCBR.LS.(PCB) MC.No.16/07.01.000/2015-16 dated July 1, 2015)

⁶ As per definition of Ministry of Commerce and Industry, Govt. of India

⁷ With effect from May 5, 2021