No Interest On Loans Up To ₹50,000: This Will Ease The Burden Of Small Loan Recipients; RBI’s New Guidelines Come Into Effect From April 1

The Reserve Bank of India (RBI) has said that banks, especially priority sector banks (PSLs), will not be able to charge any access fee for lending small loans. RBI says that in case of priority sector loans, no ADHOC service charges or credit inspection fees will be levied on loans up to Rs 50,000.

This will free small loan borrowers from undesirable financial pressure. RBI has issued new master guidelines on priority sector lending (PSL). It will implement the existing guidelines from 2020. The new guidelines came into effect from April 1, 2025.  https://www.rbi.org.in/

What is priority sector lending?

Priority Sector Lending (PSL) is a directive from RBI in India. Banks are made to lend a portion of their loans to certain specific sectors of the economy. These sectors are believed to have high demand for inclusive growth, poverty reduction and development.  https://www.rbi.org.in/home.aspx/

But not because of marginal profitability or risk. The policy favours the poor and economically weaker sections of the society like farmers, small and medium enterprise and poor households to get low cost credit.

Banks that are unable to meet their PSL target obligation have to spend on financial schemes like Rural Infrastructure Development (RIDF) and National Bank for Agriculture and Rural Development i.e. NABARD.

Agriculture, education are the sectors with highest demand

1. Agriculture: Farm credit to industries like dairy, poultry and construction credit for building infrastructure like cold storage.

2. MSME Loans: Micro, small and medium enterprise credit loans.

3. Education: Rs 10 lakh for studying in India and Rs 20 lakh for studying abroad.

4. Housing: Home loan for house construction up to Rs 35 lakh in urban areas and Rs 25 lakh in other places.

5. Backward classes: SC/ST, women and economically weaker sections population avail loans from banks.

6. Others: Export credit loans, renewable energy and social infrastructure like school and hospital construction.

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