RBI Revises PSL Guidelines With Enhanced Limit, Scope; Minor Hike In Loan Limits For Small, Marginal Farmers

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ICICI Securities Report

The Reserve Bank of India has revised its Priority Sector Lending guidelines, which would be applicable from April 01, 2025. Key changes include:

1. Introduction of new sub-segment of 14% non-corporate farmer within agri’s 18% sub-limit).

2. Enhancement of limit on several loans including housing, education, renewable etc.

3. Expansion of borrowers under ‘weaker section’.

4. RBI has specified the interest rates on RIDF, which seems to get punitive commensurate with the shortfall.

5. It has also increased the limit for small and marginal farmers from Rs 0.2 million to Rs 0.25 million without changing the overall limit of 10%.

We note that compliance in SMF has been tough for most of the banks and the loan limit hike may not alter the situation materially. We would believe these revised guidelines are more of a ‘tweak’. Banks with sizeable mortgage book, such as HDFC Bank, SBI etc. appear minor beneficiaries at the margin.

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