RBI Extends Priority Sector Lending For RE Projects Upto Rs 35cr

The Reserve Bank of India (RBI) has now extended funding for renewable projects in the country up to 35 crore under the Priority Sector Lending. The central bank regulator has now issued revised guidelines on Priority Sector Lending (PSL) after a comprehensive review of existing provisions, incorporating feedback from stakeholders. The revised funding is estimated to ensure the installation of solar projects up to 8 MW to 10 MW by rough estimates.

Some key changes include increasing loan limits for various categories, including housing loans for expanded PSL coverage, and broadening the criteria under which loans may be classified as ‘Renewable Energy.’ The new guidelines will come into effect on April 1, 2025.

In its guidelines, the RBI stated: “Bank loans up to a limit of ₹35 crore to borrowers for renewable energy-based power generation and renewable energy-based public utilities, such as street lighting systems and remote village electrification, will be eligible for priority sector classification. For individual households, the loan limit will be ₹10 lakh per borrower. However, for rural areas, the RBI has set a higher limit.” Additionally, lending to Medium Enterprises, Social Infrastructure, and Renewable Energy will be considered for priority sector achievement, but only up to 15% of ANBC.” Within renewable energy, the lending target of ₹35 crore is estimated to support an 8-10 MW solar installation.

The latest PSL revisions introduced by the RBI include expanding the purposes for which loans can be classified under ‘Renewable Energy.’ RBI’s latest notification complements its earlier directive urging Urban Co-operative Banks (UCBs) to achieve an overall PSL target of 75% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposures (CEOBSE), whichever is higher, by FY2025-26. The notification also sets interim targets of 60% for FY2023-24 and 65% for FY2024-25.