Banks may rework priority-sector lending plans after RBI tweaks

The Reserve Bank of India's (RBI's) recent tweak to the incentive framework may push banks to take their plans for priority-sector lending (PSL) back to the drawing board to increase staff strength in branches and tone up working of Business Correspondent Network in 196 districts with low credit penetration.

- ABHUJIT LELE

The central bank recently revised the incentive structure for PSL to boost credit flow to regions with lower coverage. For 196 districts with per capita PSL less than 9,000, RBI has assigned a higher weight of 125 per cent to incremental priority credit flow. For 198 districts with higher PSL (those with per capita PSL of higher than ₹42,000), the risk weight is 90 per cent.

In a notification last week, RBI said the lists of districts have been updated after a review. These lists will remain valid until FY 2026-27. Senior public sector bankers said the ambit of PSL has expanded over the period to include a wide range of areas, like food processing and renewable energy.