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RBI Updates PSL Norms to Aid Banks : Experts Say RBI's Updated PSL Guidelines Will Favor Banks

Experts Say RBI's Updated PSL Guidelines Will Favor Banks
On March 25, the RBI announced revisions to its priority sector lending norms, which are expected to benefit banks with large housing loan portfolios while also intensifying competition in the renewable energy sector.

Synopsis

The RBI's recent updates to its priority sector lending norms are set to benefit banks with substantial housing loan portfolios, while also increasing competition within the renewable energy sector. Major banks like SBI and HDFC Bank stand to gain significantly from these changes.

Key Takeaways

  • RBI has revised priority sector lending norms.
  • Increased loan limits for housing loans.
  • Four major banks are expected to benefit significantly.
  • Competition in the renewable energy sector is set to rise.
  • New guidelines become effective from April 1.

New Delhi, March 25 (NationPress) The Reserve Bank of India (RBI) has made a significant move by revising its priority sector lending (PSL) norms, a decision that is expected to positively impact banks with substantial housing loan portfolios. Additionally, this alteration will heighten competition within the renewable energy sector, experts indicated on Tuesday.

In an announcement made late on Monday, the RBI has raised the loan limits under PSL for housing and broadened the categories of loans that can be considered as renewable energy lending.

These new guidelines are set to come into effect on April 1.

A report by NDTV Profit outlines that major banks such as State Bank of India (SBI), HDFC Bank, ICICI Bank, and Axis Bank are likely to reap the most benefits from the increased housing loan limits under PSL.

As of the end of the December quarter, HDFC Bank held the largest retail mortgage portfolio at Rs 8.17 lakh crore, followed by SBI at Rs 7.92 lakh crore, ICICI Bank at Rs 4.27 lakh crore, and Axis Bank at Rs 1.67 lakh crore.

According to the new PSL guidelines, housing loans have been classified based on population size. Loans amounting to Rs 35 lakh in areas with populations below 10 lakh, Rs 45 lakh in regions with populations between 10 lakh and 50 lakh, and Rs 50 lakh in cities with populations exceeding 50 lakh will now qualify as priority sector lending.

Experts have pointed out that these adjustments were anticipated for some time, indicating that the RBI is merely responding to the increasing cost of housing rather than promoting additional expenditure.

In the renewable energy sector, as noted by the NDTV Profit report, competition is projected to become fiercer, as the RBI has broadened the criteria for PSL loans in this area.

Loans up to Rs 35 crore for renewable energy-based power generation, public utilities, street lighting systems, and electrification of remote villages will now be eligible under PSL.

For individual households, the loan cap will be Rs 10 lakh per borrower. The report also mentioned, "Banks are already engaged in aggressive competition to finance renewable energy projects, and this adjustment could lead to even more intense competition for smaller loans in this domain."

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