What changed
Previously, only deposits with NABARD for priority sector lending shortfall were exempt from LEF exposure limits. Now, contributions to NHB, SIDBI, MUDRA Ltd., or any other entity specified by RBI for the same purpose are also exempt.
What it means for you
Banks can now park PSL shortfall funds with multiple designated institutions without these amounts counting toward their large exposure limits. This provides more flexibility in managing priority sector compliance and reduces the risk of breaching exposure caps.
What you must do
- Update internal LEF monitoring systems to exclude contributions to NHB, SIDBI, MUDRA, and any RBI-specified entities for PSL shortfall.
- Review current PSL shortfall contributions to ensure they are correctly classified as exempt under the amended framework.
- Communicate the change to relevant credit risk and compliance teams for immediate implementation.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Credit risk management teams, Compliance departments handling priority sector lending
When does this amendment take effect?
The instruction is applicable with immediate effect from the date of the circular, June 9, 2025.