What changed
The glide path for achieving the overall PSL target of 75% of ANBC/CEOBSE and the weaker sections sub-target of 12% has been extended by two years, now ending March 31, 2026 instead of March 31, 2024. Additionally, UCBs are not required to contribute to RIDF or other funds for PSL shortfalls during FY21 and FY22; contributions already made can offset FY23 shortfalls.
What it means for you
UCBs get more breathing room to ramp up priority sector lending without penalty, reducing immediate compliance pressure. The waiver of RIDF contributions for earlier years eases liquidity strain, but banks must still meet stepped targets by FY26. This signals RBI's intent to support cooperative banks while maintaining long-term PSL discipline.
What you must do
- Update internal PSL target planning to align with the new glide path: 60% by FY24, 65% by FY25, 75% by FY26.
- Adjust weaker sections sub-target milestones: 11.50% by FY24, 11.75% by FY25, 12% by FY26.
- Review any RIDF contributions made for FY21-22; offset against FY23 shortfalls if applicable, and claim refunds for excess.
- Monitor PSL achievement quarterly to ensure smooth transition and avoid last-minute shortfalls.
- Prepare for separate incentive announcements from RBI for UCBs meeting targets as of March 31, 2023.
Who it affects
Primary (Urban) Co-operative Banks (UCBs) excluding Salary Earners’ Banks, UCBs under all-inclusive directions (exempted from RIDF contributions), NABARD, NHB, SIDBI, MUDRA Ltd. (as fund recipients for PSL shortfall)
What are the new PSL target deadlines for UCBs?
The overall PSL target is 60% of ANBC/CEOBSE by March 31, 2024, 65% by March 31, 2025, and 75% by March 31, 2026. The weaker sections sub-target is 11.50% by FY24, 11.75% by FY25, and 12% by FY26.
Do UCBs have to pay for PSL shortfalls during FY21 and FY22?
No, RBI has waived the requirement to contribute to RIDF or other eligible funds for PSL shortfalls in FY21 and FY22. Any contributions already made can be used to offset FY23 shortfalls, with excess refunded.
Are there any incentives for UCBs that already meet PSL targets?
Yes, RBI has stated that suitable incentives will be announced separately for UCBs that met the prescribed targets as of March 31, 2023.