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Urban co-operative banks (UCBs) got a two-year breather to achieve priority sector lending (PSL) targets. The phase-in time for the achievement of PSL targets by UCBs has been extended up to March 31, 2026.
This is to ease the implementation challenges faced by the UCBs.
RBI Governor Shaktikanta Das said suitable incentives shall be provided to UCBs that have met the prescribed targets as on March 31, 2023. The PSL target as of March-end 2023 was 60 per cent of advances.
The PSL targets for UCBs were revised in 2020. They were provided a glide path till March 31, 2024, to achieve the revised targets.
Under the revised targets, 75 per cent of their advances have to comprise priority sector loans, including loans to micro, small and medium enterprises, export credit, housing, education, and agriculture, among others.
Karthik Srinivasan, Senior Vice President, Group Head-Financial Sector Ratings, ICRA, said: “In the backdrop of the failure of a large UCB, RBI increased their PSL targets from 40 per cent in March 2020 to 75 per cent by March 2024 to improve the granularity of their loan book. The proposal to allow more time to meet the targets will reduce their PSL purchases and support their profitability in the interim.”
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