Reserve Bank of India (RBI) has issued revised Master Directions on Priority Sector Lending (PSL), effective April 1, 2025, replacing the 2020 guidelines. These directions apply to all commercial banks, including Regional Rural Banks (RRBs), Small Finance Banks (SFBs), Local Area Banks (LABs), and Urban Co-operative Banks (UCBs), except Salary Earners’ Banks. The framework outlines lending targets across key sectors such as agriculture, micro, small, and medium enterprises (MSMEs), export credit, education, housing, social infrastructure, renewable energy, and weaker sections. The guidelines specify computation methods for Adjusted Net Bank Credit (ANBC) and Credit Equivalent of Off-Balance Sheet Exposures (CEOBSE) to determine PSL targets. A new weight-based system has been introduced to address regional disparities in PSL credit flow. Additionally, the directions provide details on on-lending norms, investment in securitization notes, inter-bank participation certificates, and co-lending arrangements between banks and Non-Banking Financial Companies (NBFCs). The PSL monitoring framework includes shortfall calculation and penalties for non-achievement of targets. The updated guidelines aim to enhance the flow of credit to priority sectors while ensuring financial stability.
RESERVE BANK OF INDIA
www.rbi.org.in
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
INDEX
| Para No. |
Particulars |
| CHAPTER – I PRELIMINARY |
|
| 1. | Short Title and Commencement |
| 2. | Applicability |
| 3. | Purpose |
| 4. | Definitions/Clarifications |
| CHAPTER – II
CATEGORIES AND TARGETS UNDER PRIORITY SECTOR |
|
| 5. | Categories under Priority Sector |
| 6. | Computation of Adjusted Net Bank Credit |
| 7. | Targets/Sub-targets for Priority Sector |
| 8. | Adjustments for weights in PSL Achievement |
| CHAPTER – III
DESCRIPTION OF ELIGIBLE CATEGORIES UNDER PRIORITY SECTOR |
|
| 9. | Agriculture |
| 10. | Micro, Small and Medium Enterprises |
| 11. | Export Credit |
| 12. | Education |
| 13. | Housing |
| 14. | Social Infrastructure |
| 15. | Renewable Energy |
| 16. | Others |
| 17. | Weaker Sections |
| CHAPTER – IV MISCELLANEOUS |
|
| 18. | Investments by Banks in Securitisation Notes |
| 19. | Transfer of Assets through Direct Assignment/Outright Purchase |
| 20. | Inter Bank Participation Certificates |
| 21. | Priority Sector Lending Certificates |
| 22. | Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for On-Lending |
| 23. | Bank loans to NBFCs for On-Lending |
| 24. | Bank loans to HFCs for On-Lending |
| 25. | Cap on On-Lending |
| 26. | Co-lending by Banks and NBFCs to priority sector |
| 27. | PSL eligibility for COVID-19 measures |
| 28. | Monitoring of Priority Sector Lending Targets |
| 29. | Non-achievement of Priority Sector Targets |
| 30. | Common guidelines for Priority Sector Loans |
| ANNEX – I A: List of Districts with comparatively high PSL Credit | |
| ANNEX – I B: List of Districts with comparatively low PSL Credit | |
| ANNEX – II: Indicative list of eligible activities under Agriculture | |
| Infrastructure and Ancillary activities | |
| ANNEX – III: Indicative list of Permissible Activities under Food Processing | |
| Sector as shared by MoFPI | |
| ANNEX – IV: COVID-19 measures- PSL treatment | |
| ANNEX – V: Priority Sector Achievement – Calculation of shortfall/excess | |
| APPENDIX – List of Circulars Consolidated |
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:
Master Directions – Priority Sector Lending – Targets and Classification – 2025
(i) Allied activities i.e. activities allied to agriculture shall include dairy, fisheries, animal husbandry, poultry, bee-keeping, sericulture and similar activities.
(ii) 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.
(iii) “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:
i. Agriculture
ii. Micro, Small and Medium Enterprises
iii. Export Credit
iv. Education
v. Housing
vi. Social Infrastructure
vii. Renewable Energy
viii. 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:
| Bank Credit in India [as prescribed in item No.VI of Form `A’ under Section 42(2) of the RBI Act, 1934] | I |
| Bills rediscounted with RBI and other approved Financial Institutions | II |
| Net Bank Credit (NBC)* | III(I-II) |
| Outstanding Deposits under RIDF and other eligible funds with NABARD, NHB, SIDBI and MUDRA Ltd in lieu of non-achievement of priority sector lending targets/sub-targets + outstanding PSLCs | IV |
| Eligible amount for exemptions on issuance of long-term bonds for infrastructure and affordable housing as per circular DBOD.BP.BC. No.25/08.12.014/2014-15 dated July 15, 2014 | V |
| Advances extended in India against the incremental FCNR (B)/NRE deposits, qualifying for exemption from CRR/SLR requirements, as per the Reserve Bank’s circulars DBOD.No.Ret.BC.36/12.01.001/ 2013-14 | VI |
| dated August 14, 2013 read with DBOD.No.Ret.BC.93/ 12.01.001/2013- | |
| 14 dated January 31, 2014, DBOD mailbox clarification issued on | |
| February 6, 2014 and UBD.BPD.(PCB).CIR.No.5/13.01.000/2013-14 | |
| dated August 27, 2013 read with UBD.BPD.(PCB). Cir.No.72/ 13.01.000/ | |
| 2013-14 dated June 11, 2014. | |
| Investments made by public sector banks in the Recapitalization Bonds floated by Government of India | VII |
| Other investments eligible to be treated as priority sector (e.g. investments in securitisation notes) | VIII |
| Bonds/debentures in Non-SLR categories under HTM category | IX |
| For UCBs: Investments made after August 30, 2007 in permitted non SLR bonds held under ‘Held to Maturity’ (HTM) category | X |
| ANBC (Other than UCBs) III + IV- (V+VI+VII) +VIII + IX | |
| ANBC for UCBs III + IV – VI + X | |
* For the purpose of priority sector computation only. Banks shall not deduct / net any amount like provisions, accrued interest, etc. from NBC.
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:
| Categories
|
Targets/ Sub-targets | |||
| Domestic Commercial Banks (excl. RRBs & SFBs) & Foreign Banks with 20 branches and above |
Foreign Banks with less than 20 branches
|
Regional Rural Banks
|
Small Finance Banks
|
|
| Total Priority Sector | 40 per cent of ANBC as computed in para 6 above or CEOBSE, whichever is higher. |
40 per cent of ANBC as computed in para 6 above or CEOBSE, whichever is higher; out of which up to 32% can be in the | 75 per cent of ANBC as computed in para 6 above or CEOBSE, whichever is |
75 per cent of ANBC as computed in para 6 above or CEOBSE, |
–
| Categories | Targets/ Sub-targets | |||
| Domestic Commercial Banks (excl. RRBs & SFBs) & Foreign Banks with 20 branches and above |
Foreign Banks with less than 20 branches |
Regional Rural Banks |
Small Finance Banks |
|
| form of Export Credit and not less than 8% can be to any other priority sector. | higher. However, lending to Medium Enterprises, Social Infrastructure and Renewable Energy shall be reckoned for priority sector achievement up to 15 per cent of ANBC only. |
whichever is higher. | ||
| Agriculture | 18 per cent of ANBC or CEOBSE, whichever is higher. Within this target, 14 percent is prescribed for Non-Corporate Farmers (NCFs), out of which a target of 10 percent is prescribed for SMFs. |
Not applicable | 18 per cent ANBC or CEOBSE, whichever is higher. Within this target, 14 percent is prescribed for NCFs, out of which a target of 10 percent is prescribed for SMFs. |
18 per cent of ANBC or CEOBSE, whichever is higher.Within this target, 14 percent is prescribed for NCFs, out of which a target of 10 percent is prescribed for SMFs. |
| Micro Enterprises | 7.5 per cent of ANBC or CEOBSE, whichever is higher | Not applicable | 7.5 per cent of ANBC or CEOBSE, whichever is higher |
7.5 per cent of ANBC or CEOBSE, whichever is higher |
| Advances to Weaker Sections | 12 percent of ANBC or CEOBSE, whichever is higher | Not applicable | 15 per cent of ANBC or CEOBSE, whichever is higher |
12 percent of ANBC or CEOBSE, whichever is higher |
7.2 The priority sector lending targets for UCBs shall be as follows:
| Categories | Targets as a percentage of ANBC or CEOBSE, whichever is higher |
| Total Priority Sector | 60% |
| Micro Enterprises | 7.5% |
| Advances to Weaker Sections | 12% |
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 ₹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 ₹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:
i. Crop loans including loans for traditional/non-traditional plantations, horticulture and allied activities
ii. Medium and long-term loans for agriculture and allied activities (e.g. purchase of agricultural implements and machinery and developmental loans for allied activities)
iii. Loans for pre and post-harvest activities viz., spraying, harvesting, grading and transporting of own farm produce
iv. Loans to distressed farmers indebted to non-institutional lenders
v. Loans under the Kisan Credit Card Scheme
vi. Loans to small and marginal farmers (SMFs) for purchase of land for agricultural purposes
vii. Loans against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months subject to a limit up to ₹90 lakh against Negotiable Warehouse Receipt (NWRs)/Electronic Negotiable Warehouse Receipt (eNWRs) and up to ₹60 lakh against warehouse receipts other than NWRs/eNWRs
viii. Loans to farmers for installation of stand-alone solar agriculture pumps and for solarisation of grid connected agriculture pumps
ix. 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 ₹4 crore per borrowing entity, will be eligible:
(i) Crop loans to farmers which will include traditional/non-traditional plantations and horticulture and loans for allied activities
(ii) 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)
(b) Loans for pre and post-harvest activities viz., spraying, harvesting, grading and transporting of their own farm produce Loans up to ₹4 crore against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months against NWRs/eNWRs and up to ₹2.5 crore against warehouse receipts other than NWRs/eNWRs
(c) Loans up to ₹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 ₹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 ₹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:
i. Loans specified in Annex II (Item 2)
ii. Loans up to ₹50 crore to Start-ups3 that are engaged in agriculture and
allied services
iii. Loans for Food and Agro-processing up to an aggregate sanctioned limit of ₹100 crore per borrower from the banking system (eligible activities as given in Annex III)
Notes:
1 As defined in para 9.4 of this MD
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
4As defined by Ministry of Commerce and Industry, Govt. of India
5Annex -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
7With effect from May 5, 2021
