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Commercial banks, regional rural banks, small finance banks, local area banks, and primary urban co-operative banks must maintain specific lending targets for priority sectors including agriculture, micro, small and medium enterprises, export credit, education, housing, social infrastructure, renewable energy, and weaker sections. Banks calculate targets on the basis of adjusted net bank credit or credit equivalent of off-balance sheet exposures. Banks must monitor compliance on a quarterly basis and report data at quarterly and annual intervals. Banks with priority sector shortfalls must contribute to the Rural Infrastructure Development Fund and other eligible funds established with NABARD, NHB, SIDBI, and MUDRA Ltd.
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RBI/FIDD/2020-21/72 Master Directions FIDD.CO.Plan.BC.5/04.09.01/2020-21 September 04, 2020 ( Updated as on March 25, 2025 ) ( Updated as on June 21, 2024 ) ( Updated as on July 27, 2023 ) ( Updated as on October 20, 2022 ) ( Updated as on August 02, 2022 ) ( Updated as on October 26, 2021 ) ( Updated as on June 11, 2021 ) ( Updated as on May 31, 2021 ) ( Updated as on April 29, 2021 ) 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 – Priority Sector Lending (PSL) – Targets and Classification. The Reserve Bank of India has, from time to time, issued a number of instructions / guidelines to banks relating to Priority Sector Lending. The Master Directions enclosed incorporate the updated instructions / guidelines on the subject. The list of circulars consolidated in this Master Direction is indicated in the Appendix . Yours faithfully, ( Nisha Nambiar ) Chief General Manager-in-Charge
INDEX
| Para No. | Particulars |
|---|---|
| CHAPTER – I: PRELIMINARY | |
| 1. | Short Title and Commencement |
| 2. | Applicability |
| 3. | Definitions/ Clarifications |
| CHAPTER – II: CATEGORIES AND TARGETS UNDER PRIORITY SECTOR | |
| 4. | Categories under Priority Sector |
| 5. | Targets /Sub-targets for Priority Sector |
| 6. | Computation of Adjusted Net Bank Credit (ANBC) |
| 7. | Adjustments for weights in PSL Achievement |
| CHAPTER – III: DESCRIPTION OF ELIGIBLE CATEGORIES UNDER PRIORITY SECTOR | |
| 8. | Agriculture |
| 9. | Micro, Small and Medium Enterprises (MSMEs) |
| 10. | Export Credit |
| 11. | Education |
| 12. | Housing |
| 13. | Social Infrastructure |
| 14. | Renewable Energy |
| 15. | Others |
| 16. | Weaker Sections |
| CHAPTER – IV: MISCELLANEOUS | |
| 17. | Investments by Banks in Securitisation Notes |
| 18. | Transfer of Assets through Direct Assignment /Outright Purchase |
| 19. | Inter Bank Participation Certificates (IBPCs) |
| 20. | Priority Sector Lending Certificates (PSLCs) |
| 21. | Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for On-Lending |
| 22. | Bank loans to NBFCs for On-Lending |
| 23. | Bank loans to HFCs for On-Lending |
| 24. | Limits on On-Lending |
| 25. | Co-lending by Banks and NBFCs to priority sector |
| 26. | COVID19 measures for PSL |
| 27. | Monitoring of Priority Sector Lending Targets |
| 28. | Non-achievement of Priority Sector Targets |
| 29. | 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: Calculation of Priority Sector Achievement | |
| APPENDIX – List of Circulars Consolidated |
Master Directions- Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2020
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
1.1 These Directions shall be called the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2020.
1.2 These Directions shall come into effect on the day they are placed on the official website of the Reserve Bank of India.
The provisions of these Directions shall apply to every Commercial Bank [including Regional Rural Bank (RRB), Small Finance Bank (SFB), Local Area Bank] and Primary (Urban) Co-operative Bank (UCB) other than Salary Earners’ Bank.
3.1 In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below:
‘Urban Co-operative Bank’ or ‘UCB’ means a Primary Co-operative Bank as defined under Section 5(ccv) of the Banking Regulation Act, 1949 read with Section 56 of the Act.
“On-lending” means loans sanctioned by banks to eligible intermediaries for onward lending for creation of priority sector assets. The average maturity of priority sector assets thus created by the eligible intermediaries should be co-terminus with maturity of the bank loan.
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 Credit Equivalent of Off-Balance Sheet Exposures (CEOBE) extended to borrowers for eligible priority sector activities for achievement of priority sector target, subject to the condition that the CEOBE (both priority sector and non-priority sector excluding interbank exposure) should be added to the Adjusted Net Bank Credit (ANBC) in the denominator for computation of PSL targets.
Off-balance sheet interbank exposures are excluded for computing CEOBE for the priority sector targets.
The term “all-inclusive interest” includes interest (effective annual interest), processing fees and service charges.
3.2 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.
3.3 Banks must ensure that loans extended under priority sector are for approved purposes and the end use is continuously monitored. The banks should put in place proper internal controls and systems in this regard.
CHAPTER – II
CATEGORIES AND TARGETS UNDER PRIORITY SECTOR
The details of eligible activities under the above categories are specified in Chapter III .
5.1 The targets and sub-targets set under priority sector lending, to be computed on the basis of the ANBC/ CEOBE as applicable as on the corresponding date of the preceding year, are as under:
| Categories | 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 below or CEOBE whichever is higher | 40 per cent of ANBC as computed in para 6 below or CEOBE whichever is higher; out of which up to 32% can be in the form of lending to Exports and not less than 8% can be to any other priority sector | 75 per cent of ANBC as computed in para 6 below or CEOBE whichever is higher; However, lending to Medium Enterprises, Social Infrastructure and Renewable Energy shall be reckoned for priority sector achievement only up to 15 per cent of ANBC. | 75 per cent of ANBC as computed in para 6 below or CEOBE whichever is higher. |
| Agriculture | 18 per cent of ANBC or CEOBE, whichever is higher; out of which a target of 10 percent# is prescribed for Small and Marginal Farmers (SMFs) | Not applicable | 18 per cent ANBC or CEOBE, whichever is higher; out of which a target of 10 percent# is prescribed for SMFs | 18 per cent of ANBC or CEOBE, whichever is higher; out of which a target of 10 percent# is prescribed for SMFs |
| Micro Enterprises | 7.5 per cent of ANBC or CEOBE, whichever is higher | Not applicable | 7.5 per cent of ANBC or CEOBE, whichever is higher | 7.5 per cent of ANBC or CEOBE, whichever is higher |
| Advances to Weaker Sections | 12 percent# of ANBC or CEOBE, whichever is higher | Not applicable | 15 per cent of ANBC or CEOBE, whichever is higher | 12 percent# of ANBC or CEOBE, whichever is higher |
