SFB Stocks Rise as RBI Eases Priority Sector Lending Norms
- RBI Eases Norms: Priority sector lending requirement for SFBs reduced from 75% to 60%.
- Shares of major SFBs rose up to 4% following the announcement.
- Morgan Stanley sees the move as a structural boost for SFB growth.
Shares of small finance banks (SFBs) including Utkarsh, Equitas, Ujjivan, ESAF, AU SFB, and Jana SFB rallied up to 4 percent on Monday, June 23, after the Reserve Bank of India (RBI) announced a significant relaxation in priority sector lending (PSL) norms.
The RBI has reduced the mandatory lending requirement for SFBs to priority sectors from 75 percent to 60 percent of total lending. These sectors typically include agriculture, micro and small enterprises, education, housing, and renewable energy. The relaxation is expected to ease compliance pressures and enhance the flexibility of loan portfolios.
As per the revised guidelines, SFBs are now required to allocate 60 percent of their Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposure (CEOBE), whichever is higher, to PSL. Out of this, at least 40 percent must still go to core PSL sub-sectors, while the remaining 20 percent can be directed toward any PSL category.
International brokerage Morgan Stanley termed the RBI’s move as a 'structural positive', projecting long-term growth benefits for SFBs. The market responded positively, with SFB stocks witnessing strong buying interest following the announcement.
