Revised PSL Norms To Aid Big Banks, Intensify Competition In Renewable Energy Sector

The Reserve Bank of India's move to enhance priority sector lending guidelines will help banks with larger share of housing loan book but will also intensify competition in the renewable energy space, three bankers told NDTV Profit.

State Bank of India, HDFC Bank, ICICI Bank, and Axis Bank stand to benefit the most from an increase in housing loan limits under PSL.

Under retail loans, HDFC Bank's retail mortgage book was Rs 8.17 lakh crore at the end of December quarter, followed by SBI's at Rs 7.92 lakh crore, ICICI Bank at Rs 4.27 lakh crore and Axis Bank at Rs 1.67 lakh crore.

Late Monday, the RBI revised PSL norms by increasing several loan limits, including housing loans and expanded the purposes based on which loans may be classified under 'renewable energy'.

PSL norms basically mandate banks to allocate a certain percentage of their credit to specific sectors that are crucial for economic development, including agriculture, MSMEs, education, housing, and social infrastructure. The revised guidelines will come into effect from April 01.

Bank loans for priority sector classification for the housing sector are categorised based on the population of the area--Rs 35 lakh (earlier Rs 25 lakh) for centres with a population under 10 lakh, Rs 45 lakh (earlier Rs 35 lakh) for those with a population between 10 lakh and 50 lakh and Rs 50 lakh (earlier Rs 45 lakh) for those with a population of 50 lakh and above.

These revisions were due for some time now and the RBI is trying to keep pace with the rising housing rates rather than any additional increase in spending power, a state-owned banker said.

For renewable energy, bankers believe that competition will intensify further given that the RBI has expanded the scope of loans classified under this sector for PSL.

Bank loans up to Rs 35 crore to borrowers for renewable energy-based power generators and for renewable energy-based public utilities, street lighting systems, remote village electrification will be eligible for PSL, the RBI circular said. For individual households, loan limit will be Rs 10 lakh per borrower.

This has come as funding competition is already quite high among banks for the renewable energy sector. With this move, competition may increase for smaller ticket size loans, said one of the bankers mentioned above.

The renewable energy sector has been demanding an increase in its share under the priority sector as it will incentivise public sector companies to offer better rates as compared to non-priority that offers higher rates.

For the quarter ended December, SBI's loans sanctioned for renewable energy projects on a fund basis were Rs 61,808 crore and non-fund basis were Rs 3,101 crore.

The RBI also decreased the overall PSL target for urban co-operative banks to 60% of adjusted net bank credit or credit equivalent of off-balance sheet exposures or whichever is higher, from the earlier 65%.

It has also expanded the list of eligible borrowers under the category of weaker sections and has removed the existing cap on loans by UCBs to individual women beneficiaries.