The Reserve Bank of India has revised priority sector lending (PSL) norms for small finance banks (SFBs), reducing their overall PSL target from 75 per cent of Adjusted Net Bank Credit (ANBC) to 60 per cent of ANBC or Credit Equivalent of Off-Balance Sheet Exposures (CEOBE), whichever is higher, effective from financial year 2025-26 onwards. Under the revised framework, SFBs must continue to allocate 40 per cent of ANBC or CEOBE (whichever is higher) to PSL sub-sectors in line with existing PSL prescriptions, while the additional discretionary component is reduced from 35 per cent to 20 per cent and may be allocated to one or more PSL sub-sectors where the bank has a competitive advantage. The instructions are issued under Section 22(1) of the Banking Regulation Act, 1949.
Reserve Bank of India 2025-06-20
Reserve Bank of India lowers small finance banks’ priority sector lending requirement to 60 per cent of ANBC from FY 2025-26
The Reserve Bank of India revised priority sector lending norms for small finance banks, reducing the target from 75% to 60% of Adjusted Net Bank Credit or Credit Equivalent of Off-Balance Sheet Exposures, effective from the financial year 2025-26. SFBs must allocate 40% to PSL sub-sectors per existing prescriptions, with the discretionary component reduced from 35% to 20%. These changes are issued under Section 22(1) of the Banking Regulation Act, 1949.