RBI Limits excessive charges on loans up to Rs 50,000 under PSL
RBI has made it clear that banks cannot impose excessive charges, particularly on smaller loan amounts under the priority sector lending (PSL) category.
Bank said that no loan-related and ad hoc service charges or inspection charges shall be levied on priority sector loans up to Rs 50,000. This crucial step has been taken to protect small borrowers from unnecessary financial stress and to also ensure fair that there is a fair lending process
The bank stated, "No loan related and ad hoc service charges/inspection charges shall be levied on priority sector loans up to Rs 50,000".
The Reserve Bank of India (RBI) has issued new Master Directions on Priority Sector Lending (PSL). It will come into effect on April 1, 2025. The updated guidelines are set to replace the existing framework established under the 2020 PSL directions.
Under these updated guidelines the central bank has also clarified that loans taken against gold jewellery acquired by banks from Non-Banking Financial Companies (NBFCs) will not be considered under the priority sector lending category. This means banks cannot classify such loans as part of their PSL targets.
The move is intended to ensure that priority sector funds are directed towards sectors that are really in need of financial support, such as agriculture, small enterprises, and also the weaker sections of society.
It said "Loans against gold jewellery acquired by banks from NBFCs are not eligible for priority sector status".
The RBI also confirmed that all loans categorized under the earlier PSL guidelines (2020 framework) will continue to be eligible for priority sector classification until their maturity. This decision ensures a seamless transition between borrowers and banks, allowing them to follow a smooth transition to the new guidelines.
RBI will introduce a more precise monitoring system to ensure a better compliance with PSL targets. Banks will now be required to submit detailed data on their priority sector advances on a quarterly and annual basis.
As per the guidelines the data must be reported within fifteen days from the end of each quarter and within one month from the end of the financial year. This step focuses to improve transparency and accountability in the implementation of PSL.
Banks that fail to meet their prescribed PSL targets will be required to contribute to the Rural Infrastructure Development Fund (RIDF) and other financial schemes administered by NABARD and similar institutions.
This makes sure that even if banks fail to meet their direct lending requirements, they will continue to support priority sector development through financial contributions.
The RBI has also reaffirmed that outstanding loans extended under specific COVID-19 relief measures will continue to be classified as priority sector lending. This decision is focused at supporting sectors that are still trying to from the economic impact of the Covid-19 pandemic.
(With ANI inputs)
