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RBI’s Revised PSL Norms to Boost Renewable Energy and Affordable Housing from April 1

Written by: Team Angel OneUpdated on: Mar 25, 2025, 2:21 PM IST
RBI updates Priority Sector Lending norms effective April 1, 2025, enhancing credit access to housing, renewable energy, UCBs, and weaker sections.
RBI’s Revised PSL Norms to Boost Renewable Energy and Affordable Housing from April 1
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The Reserve Bank of India (RBI) has released a comprehensive revision to its Priority Sector Lending (PSL) guidelines, with changes set to take effect from April 1, 2025. These new measures are aimed at refining the allocation of bank credit to economically and socially significant sectors of the Indian economy.

According to the central bank, the enhanced coverage is designed to better target bank lending to priority sectors, addressing both developmental needs and financial inclusivity.

Let’s explore the key revisions and their implications:

1. Increased Housing Loan Limits

To make housing finance more accessible and inclusive, the RBI has raised the limits for loans eligible under PSL:

  • ₹50 lakh for centres with populations of 50 lakh and above
  • ₹45 lakh for cities with populations between 10 and 50 lakh
  • ₹35 lakh for centres with populations below 10 lakh

Additionally, the maximum cost of dwelling units has been specified to ensure affordability and prevent misuse of the PSL benefits.

2. Boost to Renewable Energy Lending

Recognising the importance of clean energy, the RBI has expanded the definition and loan limits for renewable energy projects:

  • Loans up to ₹35 crore for renewable energy-based power generators and public utilities
  • Loans up to ₹10 lakh for individual households installing renewable energy systems

This move is expected to catalyse investments in sustainable infrastructure and support India’s renewable energy goals.

3. Revised Targets for Urban Cooperative Banks (UCBs)

Urban Cooperative Banks will now be subject to an updated PSL target:

  • 60% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposures (CEOBSE), whichever is higher

This revision aligns UCBs more closely with commercial banks in their lending obligations to priority sectors.

4. Expanded Coverage for Weaker Sections

The definition of ‘Weaker Sections’ has been broadened to allow a wider range of beneficiaries access to credit. Notably:

  • The cap on loans to individual women beneficiaries by UCBs has been removed, encouraging gender-inclusive financial access.

These measures are in line with the broader aim of fostering equitable credit distribution across underserved demographics.

5. Reinforcing Focus Areas Under PSL

The RBI’s revised guidelines reaffirm its commitment to sectors that are vital to national development. The PSL framework continues to cover:

  • Agriculture
  • Micro, Small, and Medium Enterprises (MSMEs)
  • Export credit
  • Education
  • Housing
  • Social infrastructure
  • Renewable energy

The updated norms provide a more detailed framework and refined thresholds for each segment, ensuring targeted delivery of credit.

Conclusion

These revised PSL guidelines mark a significant step by the RBI to recalibrate credit flow in accordance with changing economic priorities and societal needs. By refining limits and expanding eligible categories, the central bank aims to enhance both the quality and reach of institutional lending across India’s diverse economy.

While these norms are set for implementation in April 2025, their announcement gives time for financial institutions to align their internal policies and practices accordingly.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

Published on: Mar 25, 2025, 2:21 PM IST

Team Angel One

Team Angel One is a group of experienced financial writers that deliver insightful articles on the stock market, IPO, economy, personal finance, commodities and related categories.

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