25 Mar , 2025 By : Debdeep Gupta
Financial stocks, mostly banks edged higher on March 25 after the Reserve Bank of India (RBI) announced changes in the Priority Sector Lending (PSL) norms. Bank Nifty index extended gains for the 9th straight day, crossing 52,000-mark, with HDFC Bank, ICICI Bank, Kotak Mahindra Bank, and Axis Bank surging up to 2 percent.
Aiming to boost credit flow to some of the major sectors, the new PSL norms would incorporate higher loan limits, widen eligibility criteria as well as increase PSL targets for banks.
One of the most significant revisions is the enhancement of loan limits under PSL. Housing loans have been increased to provide greater financial access for individuals, particularly in urban and rural areas. It added that loans to the tune of Rs 35 crore offered for renewable energy projects will be covered under the priority sector lending.
The PSL target for UCBs has been revised to 60 percent of Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposures (CEOBSE), whichever is higher. This adjustment is expected to strengthen the role of cooperative banks in supporting priority sectors, ensuring credit flows where it is needed most.
Analysts view these revised guidelines as a crucial step forward, helping banks more efficiently manage their PSL portfolios—an area that has historically posed challenges for many institutions.
By expanding the pool of PSL-eligible borrowers and increasing flexibility in lending limits across critical sectors such as housing, education, and renewable energy, experts believe the new framework will drive greater financial inclusion.
"We believe these measures are incrementally positive for the banking sector as a whole, with major players such as HDFC Bank, ICICI Bank, SBI, and Axis Bank emerging as the primary beneficiaries," noted analysts at Motilal Oswal Financial Services.
Meanwhile, analysts at ICICI Securities highlighted that the increase in home loan limits will support credit growth and help banks achieve PSL targets, thereby contributing to improved margins.
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