RBI updates master directions on Priority Sector Lending (PSL).


The Reserve Bank of India on 20th October 2022, updated the Master Directions on Priority Sector Lending (PSL) – Targets and Classification. The provisions of this 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.

RBI has updated para 17 which deals with Investments by banks in securitisation notes (not applicable to RRBs and UCBs) in which the following has been notified:

Investments by banks in ‘securitisation notes’, representing loans to various categories of priority sector, except ‘others’ category, are eligible for classification under respective categories of priority sector depending on the underlying assets provided:

  • Investment by banks in securitisation notes with loans against gold jewellery originated by NBFCs as underlying, are not eligible for priority sector status.

Further under para 21, Banks other than SFBs are allowed to extend credit to registered NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised SRO for the sector, for on-lending to individuals and also to members of SHGs / JLGs.

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