SBI Research Urges RBI to Modernise PSL Norms with Higher Housing and Education Loan Limits

The Reserve Bank of India (RBI) may need to revisit the Priority Sector Lending (PSL) framework as rising property prices and education expenses reshape borrowing patterns. A new SBI Research report has recommended increasing PSL eligibility limits for home and education loans.

The report argues that the current framework, which has been in place for decades with periodic revisions, needs to be aligned with present-day economic realities. The recommendations also come after the RBI introduced stricter safeguards for PSL loans originated through intermediary lenders earlier in 2026.

SBI Research Recommends Higher PSL Home Loan Limits

SBI Research has proposed raising the PSL-eligible home loan limit to ₹1 crore in metro centres and ₹75 lakh in other centres. At present, housing loans qualify for PSL based on city-specific loan and property value thresholds, with the maximum eligible loan amount capped at ₹50 lakh in cities with populations exceeding 50 lakh.

According to the report, increasing property prices across urban centres have reduced the effectiveness of existing limits. The suggested revision aims to keep PSL eligibility aligned with prevailing housing market conditions and borrower requirements.

Education Loan PSL Limit May Be Raised to ₹50 Lakh

The report has also recommended doubling the PSL-eligible education loan limit from ₹25 lakh to ₹50 lakh. SBI Research noted that fees charged by professional educational institutions have increased significantly in recent years.

In addition, a growing number of Indian students are pursuing higher education overseas, resulting in higher financing requirements. The proposed enhancement seeks to ensure that education loans remain relevant within the PSL framework and continue to support students facing rising academic expenses.

Rising Housing Loan Sizes Driving Need for Review

According to SBI Research, the average ticket size of incremental housing loans is expected to reach ₹45 lakh to ₹50 lakh. As borrowing requirements move closer to existing PSL eligibility thresholds, fewer housing loans may qualify under the current framework.

The report suggests that this trend could limit the expansion of PSL-compliant housing credit despite sustained demand in the residential property market. A revision of the eligibility criteria could therefore help maintain the relevance of housing loans within priority sector lending targets.

Climate Finance and Infrastructure Lending Among Proposed Changes

Beyond increasing loan limits, SBI Research has recommended expanding the scope of the PSL framework to address emerging financing needs. The report has suggested the inclusion of climate sustainability finance and broader infrastructure lending within the priority sector ambit.

It has also called for revised limits for renewable energy and social infrastructure projects. Additionally, SBI Research has proposed changes to the Rural Infrastructure Development Fund to encourage greater direct lending participation by banks.

Read More: India’s Securitisation Market Hits ₹60,000 Crore in Q1 FY27.

For daily market updates and regular stock market news in Hindi, stay tuned to Angel One's share market news in Hindi.

Conclusion

The SBI Research report has called for a comprehensive review of the Priority Sector Lending framework, citing changes in housing costs, education expenses and broader economic priorities. Key recommendations include raising PSL-eligible home loan limits to ₹1 crore in metro centres and ₹75 lakh elsewhere, along with increasing the education loan ceiling to ₹50 lakh.

The report also advocates expanding PSL coverage to areas such as climate finance, renewable energy and infrastructure. These suggestions come amid ongoing discussions on modernising lending norms to align with evolving financing requirements and the government's Viksit Bharat vision.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.