An SBI research report recommends comprehensive Priority Sector Lending reforms aligned with Viksit Bharat 2047. Key proposals include expanding PSL to cover infrastructure and green finance, revising sub-sector ceilings, and creating separate targets for climate-resilient agriculture. The report argues current PSL guidelines, last substantially revised in 2020, fail to capture India's evolving credit needs. It suggests integrating renewable energy projects and logistics infrastructure into PSL categories to redirect formal bank credit toward development-critical sectors currently starved of affordable financing.

Priority Sector Lending (PSL) is the RBI-mandated framework requiring banks to direct a minimum percentage of their Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposure (CEOBE), whichever is higher, toward specified economically vulnerable or development-critical sectors. Currently, domestic commercial banks must lend 40% of ANBC to priority sectors; foreign banks with 20+ branches face the same 40% target, while those with fewer branches target 32%.

The eight broad PSL categories are: Agriculture (18% of ANBC, with 10% to Small & Marginal Farmers), Micro Enterprises, Education, Housing, Social Infrastructure, Renewable Energy, Export Credit, and Others. Shortfalls must be deposited in government-specified funds — Rural Infrastructure Development Fund (RIDF) at NABARD or similar funds at NHB, SIDBI, and MUDRA — at below-market interest rates, creating a penalty mechanism.

The SBI report's proposal to include infrastructure and green finance represents a structural shift. Currently, large infrastructure projects are not PSL-eligible. Including them would allow banks to meet PSL targets while financing Viksit Bharat's capital-intensive needs. The green finance angle connects to RBI's sustainable finance taxonomy and global ESG frameworks. For examiners, the key tension is whether PSL expansion dilutes its original financial inclusion mandate or broadens its developmental impact — a classic policy design debate tested across all three exams.