RBI has reduced the Priority Sector Lending target for Small Finance Banks:
The Reserve Bank of India (RBI) has reduced the Priority Sector Lending (PSL) target for Small Finance Banks (SFBs) from 75% to 60% to enhance lending flexibility and profitability.RBI’s revised PSL norms aim to ease lending restrictions for SFBs, allowing them to diversify and improve asset quality.
Old PSL Criteria: SFBs were mandated to allocate 75% of their Adjusted Net Bank Credit (ANBC) to PSL, which led to challenges in sourcing quality borrowers and lower margins.
New PSL Criteria:
Overall PSL target reduced from 75% to 60%.
The additional PSL component reduced from 35% to 20%.
SFBs still required to maintain 40% ANBC towards specific PSL sub-sectors.
