SBI seeks priority sector status for all infra loans to boost investment

New Delhi (Raghwendra Pratap Singh) : A report by State Bank of India has proposed that all infrastructure loans be accorded priority sector status to boost investment in infrastructure or, alternatively, that such loans be excluded from the calculation of adjusted net bank credit (ANBC) for priority sector lending (PSL).

Reserve Bank of India (RBI) norms mandate that banks lend 40 per cent of ANBC to the priority sector.

We need huge investments in infrastructure to achieve the PM's vision for 2047. Long-term resources available for the same are limited in the absence of a vibrant bond market," the report said.

However, infrastructure funding done by banks from their own resources is not allowed to be classified under PSL," it said. The report recommended an upward revision in loan limits across several PSL categories, including housing, education, renewable energy, social infrastructure and bank lending to non-banking financial companies (NBFCs) for on-lending.

Among its key suggestions, it proposed increasing the PSL limit for renewable energy projects to Rs 100 crore from Rs 35 crore, raising the home loan eligibility ceiling to Rs 1 crore in metro centres and Rs 75 lakh elsewhere, and doubling the education loan limit eligible for PSL classification to Rs 50 lakh from Rs 25 lakh. It also recommended increasing the social infrastructure loan limit to Rs 25 crore and enhancing the per-borrower cap on bank loans to NBFCs for on-lending to Rs 25 lakh for agriculture and Rs 50 lakh for other sectors.

SBI said the existing PSL framework, introduced by the RBI in 1972 to improve credit access for underserved sectors, has largely succeeded in helping banks meet the mandatory lending target. However, it argued that the framework now requires recalibration to accommodate emerging financing needs linked to infrastructure development, energy transition and sustainable growth.

The report also sought reforms in the RIDF framework, including exemption of RIDF deposits from risk weight and capital adequacy calculations and rationalisation of penal charges, arguing that banks currently find it more profitable to purchase PSLCs than invest in RIDF.