{"id":46347,"date":"2025-06-26T21:40:28","date_gmt":"2025-06-26T16:10:28","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=46347"},"modified":"2025-06-26T21:40:39","modified_gmt":"2025-06-26T16:10:39","slug":"rbi-psl-guidelines-sfb","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/26-06-2025\/rbi-psl-guidelines-sfb","title":{"rendered":"RBI\u2019s Revised PSL Guidelines for Small Finance Banks"},"content":{"rendered":"\n<p><strong>Syllabus: GS 3\/Economy&nbsp;<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>In News<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Reserve Bank of India (RBI) has relaxed<strong> priority sector lending (PSL) norms for <\/strong><a href=\"https:\/\/www.nextias.com\/blog\/small-finance-banks\/\"><strong>Small Finance Banks (SFBs).<\/strong><\/a><\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background\" style=\"background-color:#ebecf0\"><tbody><tr><td><strong>Do you know?<\/strong><br>&#8211; Priority sector lending (PSL) is an <strong>RBI-mandated policy requiring banks<\/strong> to allocate a <strong>fixed portion of their loans to key sectors<\/strong> that face credit shortages but are crucial for inclusive economic growth.<br>&#8211; It comprises loans to agriculture, MSMEs, export credit, education, housing, social infrastructure, renewable energy, weaker sections and other segments.<br>1. In March 2025, the RBI had issued <strong>revised PSL guidelines for banks, enhancing limits for loans<\/strong> such as housing and education, even as the PSL target for urban cooperative banks (UCBs) was brought down from 75 per cent to 60 per cent.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Small Finance Banks (SFBs)<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>About:<\/strong> They are operational under the regulation of the RBI in India, under the purview of the apex bank\u2019s Banking Ombudsman Scheme, 2006, as amended from time to time.\n<ul class=\"wp-block-list\">\n<li>SFBs are registered as public limited companies under the Companies Act, 2013 and governed by Banking Regulations Act, 1949; RBI Act, 1934.<\/li>\n\n\n\n<li>They are subject to <strong>RBI&#8217;s prudential norms<\/strong> for commercial banks, including CRR and SLR.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Objectives:<\/strong> SFBs aim to provide savings vehicles and credit to underserved sectors like small businesses, farmers, micro-industries, and the unorganized sector through cost-effective, technology-driven operations.<\/li>\n\n\n\n<li><strong>Eligibility: <\/strong>Eligible promoters include resident individuals with 10 years of banking\/finance experience, resident-owned companies\/societies, and existing NBFCs, MFIs, and LABs. Promoters must have a strong track record (5+ years).<\/li>\n\n\n\n<li><strong>Scope<\/strong>: Small Finance Banks offer basic banking services such as Savings Accounts, Current Accounts, Fixed Deposits, Recurring Deposits, Loans, etc.<\/li>\n\n\n\n<li><strong>Capital Requirements:<\/strong> Minimum paid-up equity capital is INR 100 crore, with promoters contributing at least 40% initially (reducing to 26% within 12 years). Foreign shareholding follows the FDI policy for private sector banks.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Key Changes announced by RBI\u00a0<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>PSL loans target for SFBs has been lowered to 60 per cent of their loans from 75 per cent earlier from the current financial year.<\/li>\n\n\n\n<li>The <strong>additional component (35 per cent) of PSL<\/strong> will be reduced to 20 per cent, thereby making the overall PSL target as 60 per cent of ANBC (adjusted net bank credit) or Credit Equivalent of Off-Balance Sheet Exposures (CEOBE), whichever is higher from financial year 2025-26 onwards.<\/li>\n\n\n\n<li><strong>SFBs will continue to allocate 40 per cent<\/strong> of their ANBC or CEOBE, whichever is higher, to different sub-sectors under PSL as per the extant PSL prescriptions, while the balance 20 per cent can be allocated to any one or more sub-sectors under the PSL where the bank has competitive advantage.<\/li>\n<\/ul>\n\n\n\n<p><strong>Source: BS<\/strong><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<h3><strong>In News<\/strong><\/h3>\n<li class=\"ms-5\">The Reserve Bank of India (RBI) has relaxed priority sector lending (PSL) norms for Small Finance Banks (SFBs).<\/li>\n<p><\/p>\n<h3><strong>Small Finance Banks (SFBs)<\/strong><\/h3>\n<li class=\"ms-5\">About: They are operational under the regulation of the RBI in India, under the purview of the apex bank\u2019s Banking Ombudsman Scheme, 2006, as amended from time to time.<\/li>\n<li class=\"ms-5\">SFBs are registered as public limited companies under the Companies Act, 2013 and governed by Banking Regulations Act, 1949; RBI Act, 1934.<\/li>\n<li class=\"ms-5\">They are subject to RBI&#8217;s prudential norms for commercial banks, including CRR and SLR.<\/li>\n<li class=\"ms-5\">Objectives: SFBs aim to provide savings vehicles and credit to underserved sectors like small businesses, farmers, micro-industries, and the unorganized sector through cost-effective, technology-driven operations.<\/li>\n<p><a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/26-06-2025\/rbi-psl-guidelines-sfb\" class=\"btn btn-primary btn-sm float-end\">Read\u00a0More<\/a><\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-46347","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/46347","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=46347"}],"version-history":[{"count":3,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/46347\/revisions"}],"predecessor-version":[{"id":46359,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/46347\/revisions\/46359"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=46347"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=46347"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=46347"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}