Include infra loans in priority sector in absence of vibrant bond market: SBI economists

Business To Business, New Delhi, 07^th July, 2026:    Economists at the State Bank of India (SBI) have called for a comprehensive review of the Priority Sector Lending (PSL) framework, suggesting that infrastructure loans be considered for inclusion under the mandatory lending targets to better align the guidelines with the country's evolving economic priorities.
In a report released on Tuesday, the economists highlighted the sharp increase in trading of Priority Sector Lending Certificates (PSLCs), which rose to ₹12.2 lakh crore in FY2024-25 from ₹1.8 lakh crore in FY2017-18. The surge, they said, points to structural issues in the existing PSL framework.
According to the report, excluding the purchase of PSLCs or funds parked in the Rural Infrastructure Development Fund (RIDF), no bank is currently able to meet the mandatory target of lending 40 per cent of its adjusted net bank credit to priority sectors.
The economists argued that the growing dependence on PSLCs indicates that banks are increasingly relying on certificate trading to comply with regulatory requirements rather than directly expanding priority sector lending.
The report also presented a cost-benefit analysis of investments in the Rural Infrastructure Development Fund, concluding that banks generally find it more attractive to purchase PSLCs than to invest in the RIDF, owing to the relative financial advantages of certificate trading.
Against this backdrop, the economists recommended a comprehensive reassessment of the PSL guidelines, including the possible inclusion of infrastructure financing within the priority sector ambit. They said such a move could help channel greater credit towards critical infrastructure projects while making the framework more relevant to India's current development needs.