Clarification : Priority Sector Lending (PSL) eligibility of loans outstanding as on April 1, 2025 shall be determined with reference to the provisions of the Master Directions on Priority Sector Lending 2025

Clarification : The net PSLC outstanding (PSLC Buy minus(-) PSLC Sell) is added to the Net Bank Credit, as mentioned in para 6 of the Master Directions on Priority Sector Lending, 2025 (updated from time to time). Further, a PSLC remains outstanding until its expiry (s. no. ix of Annex to circular on Priority Sector Lending certificates dated April 07, 2016). All PSLCs will expire by March 31st and will not be valid beyond the reporting date (i.e. March 31st), irrespective of the date it was first bought/sold. Accordingly, the effect of PSLC buy is increase in ANBC and conversely the effect of PSLC sell is decrease in ANBC and the net of PSLC buy/sell is adjusted to the ANBC for every quarter. Thus, PSLCs bought or sold in any quarter of a FY will have to be taken into account in all subsequent quarters till the end of that FY.

Clarification:

(i) Outstanding deposits with NABARD made on account of PSL shortfall are eligible to be reckoned towards Agriculture sub-target and count for the achievement of overall PSL target as well.

(ii) Outstanding deposits with SIDBI and MUDRA are eligible to be reckoned under MSME lending and count for the achievement of the overall PSL target.

(iii) Outstanding deposits with NHB are eligible to be reckoned under Housing and count for the achievement of overall PSL target.

(iv) All outstanding deposits as above shall be added to Net Bank Credit (NBC) for the computation of ANBC.

Clarification: (i) In terms of the circulars mentioned above, the amount eligible for exclusion from ANBC is the incremental advances extended out of the resources generated from the eligible incremental FCNR (B) / NRE deposits. The incremental advance is calculated as the difference between outstanding advances in India as on March 7, 2014 and the Base Date (July 26, 2013).

(ii) The amount to be excluded from ANBC for computation of priority sector targets will not exceed incremental FCNR (B) / NRE deposits eligible for exemption from maintenance of CRR / SLR in terms of the circulars mentioned above.

(iii) In case, the difference in the amount of outstanding advances between March 7, 2014 and base date is zero or negative, no amount would be eligible for deduction from ANBC for the purpose of arriving at the priority sector lending targets.

Clarification: The bills purchased/ discounted/ negotiated (payment to beneficiary not under reserve) under LC is allowed to be treated as interbank exposure only for the limited purpose of computing exposure and capital requirements. It should not be excluded from the computation of ‘bank credit in India’ [As prescribed in item No.VI of Form 'A’ under Section 42(2) of the RBI Act, 1934] which allows for exclusion of interbank advance. While exposure may be to the LC issuing bank, the bills purchased/discounted amount to bank credit to its borrower constituent. If this advance is eligible for priority sector classification, the bank can classify it as PSL. Banks have to take note of the above aspect while reporting Net Bank Credit in India as well as while computing the Adjusted Net Bank Credit for PSL targets and achievement.

Clarification: If there is a decline in credit, the weighted incremental credit will be zero (0). The methodology as given below will be considered for all the districts for which data is reported in ADEPT and District-QPSA statement. Further, based on the methodology detailed below, banks are expected to monitor their own PSL achievement during the year taking into account the prescription of differential weights for credit in identified districts, for the purpose of trading in PSLCs.

Clarification: For mapping a credit facility to a particular district, the ‘place of utilization of credit’ shall be the qualifying criteria.

Clarification: While calculating district-wise incremental credit for assigning weights, the organic credit i.e. only the credit directly disbursed by banks and for which the actual borrower/beneficiary wise details are maintained in the books of the bank, will be considered. Credit disbursed through the following inorganic routes shall not be considered for incremental weights.

1. Investments by banks in securitised assets
2. Transfer of Assets through Direct Assignment/Outright purchase
3. Inter Bank Participation Certificates (IBPCs)
4. Priority Sector Lending Certificates (PSLCs)
5. Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for on-lending
6. Bank loans to NBFCs for on-lending

Bank loans to HFCs for on-lending

Clarification: The PSL guidelines are activity and beneficiary specific and are not based on type of collateral. Therefore, bank loans given to individuals/ businesses for undertaking agriculture activities do not automatically become ineligible for priority sector classification, only on account of the fact that underlying asset is gold jewellery/ornament etc. It may, however, be noted that as per FIDD Circular dated December 6, 2024, it has been advised that banks may waive collateral security and margin requirements for agricultural loans upto ₹2 lakh. Therefore, bank should have extended the loan based on scale of finance and assessment of credit requirement for undertaking the agriculture activity and not solely based on available collateral in the form of gold. Further, as applicable to all loans under PSL, banks should put in place proper internal controls and systems to ensure that the loans extended under PSL are for approved purposes and the end use is continuously monitored.

Clarification: Banks should ensure proper documentation for classifying agricultural loans under PSL as approved by their Board. Particularly while classifying loans under agriculture/SMF category, banks should maintain details regarding the location of the land for cultivation, details of crop grown, hypothecation of crops, if any; sanction of loan based on scale of finance, record of field visit by bank officials to monitor end use of agricultural loans, etc. Some of the above aspects should be available with the bank in the absence of copy of land record/lease deed particularly in case of agriculture loans to landless labourers, sharecroppers etc.

Clarification: As per extant guidelines, loans for Agriculture Infrastructure or loans for Food & Agro-processing activity are each subject to an aggregate sanctioned limit of ₹100 crore per borrower from the banking system. In case aggregate exposure across the banking industry exceeds the limit of ₹100 crore, then total exposure will cease to be classified under PSL category. The sanctioned limit of ₹100 crore has to be ascertained facility-wise for a particular entity and is exclusive of the other borrowings of the entity for PSL / non-PSL purposes. However, it needs to be ensured that the bank has assessed and sanctioned separate limits for the specific purpose of Agriculture Infrastructure or Food & Agro Processing activities of the entity, for the loans to qualify as PSL. Banks should take a declaration from the borrower regarding loan/s sanctioned by any other bank/s for the same activity and also independently seek confirmation from those banks. In the scenario, where new sanction by the bank leads to overall limit across banks exceeding ₹100 crore, it will have to inform other banks about the same. Accordingly, all other banks will have to declassify the same from PSL.

Clarification : As per Annex-III of Master Directions on Priority Sector Lending, 2025 transportation is an eligible activity under indicative list of permissible activities under Food Processing Sector. However, while classifying any facility to transporters for purchasing commercial vehicles under “Food & Agro-processing” category, it needs to be ensured that the vehicles are used exclusively for transportation of food and agro-processed products or are types of vehicles specifically used for “Food & Agro-processing” e.g. cold storage trucks, vans etc. If the commercial vehicle is also used for transportation of products other than those related to food & agro processing, the facility shall not be eligible for classification under ‘Food & Agro-processing’ category. Such loans may, however, be classified under MSME, if the borrower is eligible for classification as MSME in terms of definition given in the Master Direction – Lending to Micro, Small & Medium Enterprises (MSME) Sector dated July 24, 2017 (as updated from time to time)

Clarification: While classifying any facility to transporters for purchasing commercial vehicles under “Agriculture Infrastructure” category, it needs to be ensured that the vehicle is used exclusively for activities that are ancillary to “Agriculture Infrastructure”. If the commercial vehicle is also used for other purposes, the facility shall not be eligible for classification under ‘Agriculture Infrastructure’. Such loans may, however, be classified under MSME, if the borrower is eligible for classification as MSME as per the definition given in the Master Direction – Lending to Micro, Small & Medium Enterprises (MSME) Sector dated July 24, 2017 (as updated from time to time)

Clarification: Export credit extended by banks to the agriculture and MSME sectors is eligible to be classified as priority sector lending under the respective categories viz, agriculture and MSME, without any upper limit.

Clarification: The outstanding value may exceed ₹25 lakh on account of accrued interest due to moratorium on repayment during the study period. Accordingly, the entire outstanding amount shall be reckoned for priority sector provided the sanctioned limit does not exceed ₹25 lakh.

Clarification: Housing loans to banks’ own employees are not eligible for classification under priority sector lending, irrespective of whether they are extended on commercial terms or at subsidised rates.

Clarification: Bank loans for above purposes can be classified under MSME, wherein no cap on credit has been prescribed. However, banks can classify such activities either under MSME or Social Infrastructure, and not both. It may be noted that for classification under Social Infrastructure, the associated cap on credit shall be applicable.

Clarification: For classification under ‘Weaker Sections’, the loans should first be eligible for classification under any of the eight PSL categories as per underlying activity.

Clarification: As per extant guidelines, SMF includes individuals, SHGs, JLGs, Farmers’ Producer Companies (FPC) and Co-operatives of farmers with the accompanying criteria of membership by number and land-holding. Therefore, loans to partnership firms/co-borrowers or any director of a company holding agriculture land upto 2 hectares are not eligible to be classified under the SMF category of PSL.

Clarification: As per extant guidelines, priority sector loans are eligible for classification as loans to minority communities as per the list notified by the GoI from time to time. The same may be read with Master Circular- Credit Facilities to Minority Communities which at para 2.2 states “In the case of a partnership firm, if the majority of the partners belong to one or the other of the specified minority communities, advances granted to such partnership firms may be treated as advances granted to minority communities. Further, if the majority beneficial ownership in a partnership firm belongs to the minority community, then such lending can be classified as advances to the specified communities. A company has a separate legal entity and hence advances granted to it cannot be classified as advances to the specified minority communities”

Clarification: Declaration by the customer in the application form would suffice for classifying credit facilities to Minorities/SCs/STs under Weaker Sections. However, it needs to be ensured that, the loans should first be eligible for classification under priority sector lending as per underlying activity.

Clarification: Banks may rely on a combination of auditors’ certification provided by the originating entity and conduct of sample check by their own staff or by an auditor for the purpose. This may be suitably built into their internal policy.

Clarification: The banks are required to submit a request to Financial Inclusion and Development Department, Central Office, RBI at fiddpsd@rbi.org.in to obtain registration for PSLC trading by submitting a) DEA Fund Code b) Customer identification number and c) RBI Current Account number.

Clarification: The duration of the PSLCs will depend on the date of issue. All PSLCs will be valid till the end of the FY i.e. March 31st and expire on the next day i.e. April 1st.

Clarification: As per the extant guidelines, no transaction charges/fees are applicable for usage of the PSLC module on e-Kuber portal. The tax implications on account of trading in PSLCs may be determined by the banks in accordance with the applicable tax laws.

Clarification: 'Export Credit' can form a part of underlying assets against the PSLC - General. However, any bank issuing PSLC-General against 'Export Credit' shall ensure that the underlying 'Export Credit' portfolio is eligible for priority sector classification as per the criteria set for domestic banks.

Clarification: Foreign banks with less than 20 branches are not allowed to buy PSLC General for achieving their 8% target of lending to sectors other than exports. However, such banks are allowed to buy PSLC Agriculture, PSLC Micro Enterprises and PSLC Small and Marginal Farmer for the same.

Clarification: A bank can purchase PSLCs as per its requirements. Further, a bank is permitted to issue PSLCs upto 50 percent of previous year’s PSL achievement without having the underlying in its books. This is applicable category-wise. The net position of PSLCs (PSLC Buy – PSLC Sell) has to be considered while reporting the quarterly and annual priority sector returns. However, with regard to ascertaining the underlying assets, as on March 31st, the bank must have met the priority sector target by way of the sum of outstanding priority sector portfolio and net of PSLCs issued and purchased.

Clarification: The misclassifications, if any, will have to be reduced from the achievement of PSLC seller bank only. There will be no risk for the PSLC buyer, even if the underlying asset of the traded PSLC gets misclassified.

Clarification: There will be a real time settlement of the matched premium. Accordingly, the respective current accounts of the participating banks with RBI will be debited/ credited to the extent of the matched premium.

Clarification: The trading platform will match the buy and sell offer by following the Rule of Lowest Sale offer to the Buy offer and then within that on FIFO basis. For example, a buyer offered to pay 2% premium for a particular PSLC type and the same is available at 1.5%, 1.8% and 2%, the portal will first match with the sale deal at 1.5% and for any leftover units, it will then match with the sale offers of 1.8% and then 2% in that order, provided the buy offer is first in the queue (based on the timing of the placement of the buy offer).

Clarification: The order matching will be done on anonymous basis through the portal and the buyer/seller cannot select the counterparty. Partial matching will happen depending on the matching of premium and availability of category-wise PSLC lots for sale and purchase.

Clarification: The normal trading hours shall be from 10 AM to 4:30 PM. The PSLC market operates on all days except Saturdays, Sundays and holidays declared under The Negotiable Instruments Act, 1881 by the Government of Maharashtra.

Clarification: Paras 22, 23 and 24 of the Master Directions on Priority Sector Lending, 2025 permit banks to classify as PSL their lending to NBFCs including HFCs and NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised SRO for the sector, for on-lending to eligible priority sectors. Banks may adopt a uniform methodology for PSL classification of on-lending as follows:

a) Classification under PSL:

• The banks can classify on-lending to eligible entities in the respective categories of PSL. The classification will be allowed only when the entity has disbursed the Priority Sector Loans to the ultimate beneficiary after receiving the funds from the bank and the funds remain deployed in PSL assets.

• The entities must provide auditors’ certificate to the banks stating that the individual loans of the portfolio, against which on-lending benefit is being claimed, are not being used to claim benefit from any other bank(s). Also, they must put in place a suitable process to flag such loan(s) in their systems to enable internal/statutory auditors as well as RBI supervisors (in case of NBFCs) to verify the same.

b) Information sharing:

• The banks may devise internal control mechanisms to ensure that the portfolio under on-lending is PSL compliant. The following information/record, at the very minimum, should be collected by the bank from the eligible entities:name of the beneficiary, amount sanctioned, loan amount outstanding, loan tenure, disbursement date, category of PSL.

Clarification: Bank lending to NBFCs (other than MFIs) and HFCs is subject to a cap of 5% of average PSL achievement of the four quarters of the previous financial year. In case of a new bank the cap shall be applicable on an on-going basis during its first year of operations. The prescribed cap is not applicable for bank lending to NBFC-MFIs and other MFIs (Societies, Trusts, etc.) which are members of RBI recognised ‘Self-Regulatory Organisation’ of the sector. Bank lending to such MFIs can be classified under different categories of PSL in accordance with conditions specified in the Master Directions on Priority Sector Lending, 2025.

Clarification: While the guidelines allow sharing of risks and rewards between the bank and the NBFC for ensuring appropriate alignment of respective business objectives, the priority sector assets on the bank’s books should at all times be without recourse to the NBFC.

Clarification: Only if the bank can exercise its discretion regarding taking into its books the loans originated by NBFC as per the agreement, the arrangement will be akin to a direct assignment transaction. If the Agreement entails a prior, irrevocable commitment on the part of the bank to take into its books its share of the individual loans as originated by the NBFC, it shall not be akin to direct assignment transaction.

Clarification: Both entities, the bank and the NBFC, shall be guided by the bilateral Master Agreement entered by them for implementing the Co-lending Model (CLM). The agreement may specify any cap on the number and amount of loans that can be originated by the NBFC under the Co-lending model.

Clarification: If the Master Agreement entails a prior, irrevocable commitment on the part of the bank, it has been advised that the partner bank and NBFC shall have to put in place suitable mechanisms for ex-ante due diligence by the bank. Such due diligence should ensure compliance with RBI regulations on KYC and outsourcing of activities before disbursal of the loans by the NBFC.

Clarification: Back-to-back basis implies that the loans will be first opened by NBFC and then bank will open loan accounts subsequently.

Clarification: The bank and the NBFC can decide on this aspect as per the Master agreement between them.

Clarification: The shortfall/excess in achievement is calculated for each quarter of the financial year. The shortfall/ excess for the year is arrived at by taking a simple average of the shortfall/excess for all the four quarters. In case of shortfall in achievement of overall PSL target or any of the prescribed sub-targets, the bank will be required to contribute to specified funds maintained with NABARD/SIDBI/MUDRA/NHB.