RBI Expands LEF Exemptions for PSL Contributions by SCBs

Circular No. RBI/2025-26/48 DOR.CRE.REC.27/21.01.003/2025-26; Dated: 09.06.2025

The Reserve Bank of India (RBI) has issued a clarification expanding the scope of exemptions under the Large Exposures Framework (LEF) in relation to Priority Sector Lending (PSL) shortfall contributions.

1. Background – LEF and PSL Shortfall Deposits

Under the Large Exposures Framework, the RBI earlier prescribed that deposits maintained by Scheduled Commercial Banks (SCBs) with NABARD, made on account of shortfall in achieving PSL targets, shall not be considered as exposure for the purpose of calculating limits under the LEF.

2. Expanded Applicability to Other Entities

The RBI has now clarified that this exemption will also apply to similar contributions made by SCBs to:

• National Housing Bank (NHB)
• Small Industries Development Bank of India (SIDBI)
• Any other entity specified by the RBI

This means that PSL shortfall contributions to these institutions will likewise not be included in the computation of exposures under the LEF.

3. Implication for Scheduled Commercial Banks

This clarification provides relief to SCBs by:

• Preventing artificial inflation of exposure figures due to PSL compliance-related deposits
• Preserving lending capacity under LEF thresholds
• Reinforcing RBI’s stance that regulatory contributions for PSL compliance should not affect exposure computations

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