The new guidelines, which take effect from April 1, expand the scope of priority sector loans by enhancing loan limits for various categories, and broaden the criteria under which loans can be classified as ‘renewable energy’ for PSL purposes, which has led to a rise in non-conventional energy credit as a share of total energy credit, further encouraging investments in the sector, the report noted.
“As large banks continue to face challenges in meeting PSL targets, it would be a prudent move to classify all infrastructure loans—covering road projects, ports, railways, airports, highways, and the energy sector—either under priority sector status or as exemptions from ANBC calculations for PSL achievement. This would align with the treatment of infrastructure bonds raised for funding infrastructure and affordable housing,” the report suggested.
India has set ambitious targets for renewable energy, aiming for a non-fossil fuel installed capacity of 500 GW by 2030 and achieving net zero emissions by 2070.
On July 1, 2015, the RBI expanded the PSL framework to include loans of up to ₹150 million for borrowers engaged in solar power generation, biomass-based power generation, micro-hydel plants, and other non-conventional energy projects. This limit was increased to ₹300 million per borrower on September 4, 2020.
In the latest revision, the limit has been raised to ₹350 million per borrower, while the loan limit for individual households remains unchanged at ₹1 million per borrower.
“Although the ₹5 crore increase may seem modest compared to the last revision in 2020 (after five years), even small policy interventions can have a significant impact in the long run. These measures will support the NCE sector in achieving the dual objectives of clean energy expansion and increased PSL lending,” the SBI report added.
ALCHEMPro News Desk (DS)
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