Motilal Oswal: RBI Announces Revised PSL Guidelines
A pedestrian walks past the Reserve Bank of India (RBI) building in Mumbai, India, on Tuesday, March 3, 2020. Photographer: Kanishka Sonthalia/Bloomberg

Motilal Oswal: RBI Announces Revised PSL Guidelines

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Motilal Oswal Report

The Reserve Bank of India has announced revised guidelines for Priority Sector Lending (PSL).

The move is an attempt to emphasize inclusive banking and improve credit flow to the credit-deficient and weaker sections of the economy.

While these guidelines would improve credit flow to small and marginal farmers, it should boost the renewable energy/health infrastructure segments.

The RBI has increased the target limits, tweaked weightages and added additional activities within the gambit of PSL.

Some of the notable changes are:

1. change in weightage toward identified districts,

2. increase in targets for small/marginal farmers and weaker sections,

3. increase in limit for renewable energy and health infrastructure, and

4. higher credit limit for farmer producer organizations/ farmer producer organizations. .

The RBI guidelines, in our opinion, should improve financial inclusion and aid credit flow to various important sections of the economy.

While most banks are largely in compliance with aggregate requirement, changes in certain sub-segments would necessitate higher focus and re-orientation of PSL lending toward districts, which are witnessing inadequate credit flow.

Click on the attachment to read the full report:

Motilal Oswal Financials.pdf

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