Banks can’t impose excessive charges on loan amount upto Rs 50,000: RBI issues guidelines
The central bank said that priority sector loans up to Rs 50,000 will not incur any loan-related and ad hoc service fees or inspection expenses.
The Reserve Bank of India (RBI) has stated that banks cannot impose excessive charges, particularly on smaller loan amounts under the priority sector lending (PSL) category.
The central bank said that priority sector loans up to Rs 50,000 will not incur any loan-related and ad hoc service fees or inspection expenses.
This action seeks to guarantee equitable lending procedures and shield small borrowers from unwarranted financial load. It stated "Up to Rs 50,000, priority sector loans shall not incur loan related and ad hoc service charges/inspection charges."
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New Master Directions on Priority Sector Lending (PSL) from the Reserve Bank of India (RBI) will take effect on April 1, 2025. The revised rules are meant to supersede the current structure created under the 2020 PSL instructions.
The central bank has also made clear in these policies that loans made against gold jewellery bought by banks from Non-Banking Financial Companies (NBFCs) will not fall under the priority sector lending classification.
This excludes such loans from being classified by banks as part of their PSL goals. The action is meant to guarantee that priority sector funding are aimed at sectors really requiring financial assistance, including small enterprises, agriculture, and underprivileged society members.
Read Also : SJVN’s NJHPS organizes 23rd Edition of Vendor Development MeetLoans against gold jewellery acquired by banks from NBFCs are not eligible for priority sector status, the apex bank stated. The RBI has also assured that all loans categorized under the earlier PSL guidelines (2020 framework) will remain eligible for priority sector classification until their maturity. This move ensures continuity for borrowers and banks, allowing them to follow a smooth transition to the new guidelines.
As per the issued guidelines the data must be reported within fifteen days from the end of each quarter and within one month from the end of the financial year. This step is designed to enhance transparency and accountability in PSL implementation.
Banks failing to meet their prescribed PSL targets will be required to contribute to the Rural Infrastructure Development Fund (RIDF) and other financial schemes administered by NABARD and similar institutions. This ensures that even if banks do not meet their direct lending obligations, they still support priority sector development through financial contributions.
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