SBI Research Proposes Raising Renewable Energy PSL Loan Limit to 100 Crore Rupees
SBI Research has proposed a comprehensive overhaul of India's Priority Sector Lending (PSL) framework in a new report released in Chennai, urging the Reserve Bank of India to expand credit support for renewable energy, electric mobility, and climate finance. The proposal aims to align bank lending with the country's Viksit Bharat 2047 goals.
To accelerate the clean energy transition, the report recommended that the Reserve Bank of India raise the eligible loan ceiling for renewable energy projects nearly threefold, increasing it from the current ₹35 crore to ₹100 crore. Additionally, SBI Research suggested raising the loan limit for individual household rooftop solar installations from ₹10 lakh to ₹2 crore.
The report also advocated for bringing the electric vehicle manufacturing ecosystem into the PSL framework. Specifically, it proposed expanding the current 7.5% PSL sub-target for micro enterprises to include financing for micro, small, and medium enterprises (MSMEs) engaged in manufacturing EVs and EV components.
SBI Research highlighted that climate-related risks will significantly impact India's financial system, agriculture, and MSME sectors. To address this, the report proposed creating a new "Climate Sustainability Finance" category within the PSL framework and allowing banks' investments in green bonds, ESG bonds, and sovereign green bonds to qualify for PSL classification.
To support massive long-term infrastructure investments, the report proposed extending priority sector status to all infrastructure loans, or excluding infrastructure lending from Adjusted Net Bank Credit calculations. This would allow banks to finance these projects more aggressively without affecting their PSL compliance.
Beyond green energy, the report suggested raising the PSL limits for housing and education due to rising costs. It proposed increasing eligible housing loans to ₹1 crore in metropolitan centres and ₹75 lakh in other centres. For education, it recommended doubling the individual loan ceiling from ₹25 lakh to ₹50 lakh to cover rising tuition fees.
Finally, the report recommended raising the lending limits for social infrastructure, proposing a ₹15 crore ceiling for school projects and ₹25 crore for healthcare facilities. For the agricultural sector, it suggested doubling the eligible PSL loan limit for food and agro-processing projects to ₹200 crore per bank.
