← Policy & Regulation: Financial & market regulation (all topics)
PSL 60% of ANBC (small finance bank lending mandate)
What it is
Small finance banks must lend at least 60% of Adjusted Net Bank Credit to priority sectors, against 40% for universal banks, and at least 50% of the loan book must be in tickets up to Rs 25 lakh
These are the licence conditions that define the model - an SFB is chartered to serve the underserved, not to choose its own mix
Impact on industries
- The obligation aligns with where SFBs already have distribution and underwriting depth, so compliance is a description of the business rather than a constraint on it
- Surplus above the target converts into saleable PSLCs, turning a regulatory floor into a fee income stream
- It caps diversification - a bank cannot materially shift toward higher-ticket secured lending while holding the 60% and 50% conditions, which is exactly why universal conversion is sought
- Concentration in the same borrower cohort means credit stress arrives across the book at once, rather than being offset by unrelated exposures