Home loan PSL limit should be raised to ₹1 crore in metros, education loan cap to ₹50 lakh: Report
SBI Research has proposed raising the Priority Sector Lending (PSL) eligibility limit for home loans to ₹1 crore in metro cities and ₹75 lakh in other centres, while recommending that the education loan cap be doubled to ₹50 lakh. The report says the existing thresholds no longer reflect rising property prices and education costs, warranting a review of the RBI's PSL framework.
- Jul 7, 2026,
- Updated Jul 7, 2026 4:43 PM IST
SBI Research has proposed raising the Priority Sector Lending (PSL) eligibility limit for home loans to ₹1 crore in metro cities and ₹75 lakh in other centres, while also recommending that the education loan cap under PSL be doubled to ₹50 lakh. The proposals are part of a broader review of the Reserve Bank of India's (RBI) PSL framework to better align it with rising costs and the government's Viksit Bharat 2047 vision.
The report argues that the current loan thresholds have failed to keep pace with inflation in property prices and education costs, reducing the effectiveness of the PSL framework in supporting borrowers. It recommends revising the limits to ensure that priority sector lending remains relevant as financing needs evolve.
Higher home loan limits proposed
At present, home loans qualify for priority sector classification only up to RBI-prescribed limits that vary according to the population of a city. SBI Research has proposed increasing the eligible loan amount to ₹1 crore for metro centres and ₹75 lakh for other centres. It has also suggested increasing the maximum project cost limits while allowing a 25% borrower margin and bringing intermediated housing loans under the PSL framework.
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According to the report, the recommendation is driven by the sharp increase in residential property prices over the past few years. It noted that the average ticket size of incremental home loans is expected to rise to around ₹45-50 lakh, which is already close to the current PSL eligibility thresholds. Consequently, growth in housing loans qualifying under PSL has not kept pace with the overall expansion in banks' housing loan portfolios.
If the proposed revision is accepted, a larger number of homebuyers, particularly in metro cities where property prices are significantly higher, could become eligible for loans that qualify under the priority sector category.
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Education loan cap may double
SBI Research has also called for a significant increase in the education loan limit eligible for PSL. Under existing RBI guidelines, education loans of up to ₹25 lakh qualify for priority sector classification. The report recommends increasing this ceiling to ₹50 lakh.
The report said the cost of higher education has increased substantially in recent years because of rising fees at private medical, engineering and professional institutions. At the same time, a growing number of Indian students are pursuing overseas education, further increasing financing requirements.
Considering education a national priority, the report said the existing limit no longer reflects current realities and should be revised upward to improve access to affordable credit.
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Part of a wider PSL review
The housing and education proposals are part of SBI Research's broader recommendation for a comprehensive review of the PSL framework, which was introduced by the RBI in 1972 to ensure adequate credit flow to sectors such as agriculture, MSMEs, housing and education. Banks are required to lend 40% of their Adjusted Net Bank Credit (ANBC) to priority sectors.
According to the report, banks have been consistently meeting this target, with provisional FY26 estimates indicating overall PSL at 45% of ANBC. It argued that this presents an opportunity to modernise the framework by revising loan limits and expanding PSL coverage to emerging sectors such as infrastructure, climate sustainability finance and renewable energy.
Any changes to the PSL framework would require approval from the RBI. If adopted, the proposed revisions could enable more homebuyers and students to access loans under the priority sector category while helping banks direct credit towards sectors considered vital for inclusive and sustainable economic growth.
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SBI Research has proposed raising the Priority Sector Lending (PSL) eligibility limit for home loans to ₹1 crore in metro cities and ₹75 lakh in other centres, while also recommending that the education loan cap under PSL be doubled to ₹50 lakh. The proposals are part of a broader review of the Reserve Bank of India's (RBI) PSL framework to better align it with rising costs and the government's Viksit Bharat 2047 vision.
The report argues that the current loan thresholds have failed to keep pace with inflation in property prices and education costs, reducing the effectiveness of the PSL framework in supporting borrowers. It recommends revising the limits to ensure that priority sector lending remains relevant as financing needs evolve.
Higher home loan limits proposed
At present, home loans qualify for priority sector classification only up to RBI-prescribed limits that vary according to the population of a city. SBI Research has proposed increasing the eligible loan amount to ₹1 crore for metro centres and ₹75 lakh for other centres. It has also suggested increasing the maximum project cost limits while allowing a 25% borrower margin and bringing intermediated housing loans under the PSL framework.
MUST READ: Missed EMI on a digital loan? Here's what borrowers need to know
According to the report, the recommendation is driven by the sharp increase in residential property prices over the past few years. It noted that the average ticket size of incremental home loans is expected to rise to around ₹45-50 lakh, which is already close to the current PSL eligibility thresholds. Consequently, growth in housing loans qualifying under PSL has not kept pace with the overall expansion in banks' housing loan portfolios.
If the proposed revision is accepted, a larger number of homebuyers, particularly in metro cities where property prices are significantly higher, could become eligible for loans that qualify under the priority sector category.
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Education loan cap may double
SBI Research has also called for a significant increase in the education loan limit eligible for PSL. Under existing RBI guidelines, education loans of up to ₹25 lakh qualify for priority sector classification. The report recommends increasing this ceiling to ₹50 lakh.
The report said the cost of higher education has increased substantially in recent years because of rising fees at private medical, engineering and professional institutions. At the same time, a growing number of Indian students are pursuing overseas education, further increasing financing requirements.
Considering education a national priority, the report said the existing limit no longer reflects current realities and should be revised upward to improve access to affordable credit.
MUST READ: Interest rates of 200-700%: How India's instant loan apps are trapping borrowers
Part of a wider PSL review
The housing and education proposals are part of SBI Research's broader recommendation for a comprehensive review of the PSL framework, which was introduced by the RBI in 1972 to ensure adequate credit flow to sectors such as agriculture, MSMEs, housing and education. Banks are required to lend 40% of their Adjusted Net Bank Credit (ANBC) to priority sectors.
According to the report, banks have been consistently meeting this target, with provisional FY26 estimates indicating overall PSL at 45% of ANBC. It argued that this presents an opportunity to modernise the framework by revising loan limits and expanding PSL coverage to emerging sectors such as infrastructure, climate sustainability finance and renewable energy.
Any changes to the PSL framework would require approval from the RBI. If adopted, the proposed revisions could enable more homebuyers and students to access loans under the priority sector category while helping banks direct credit towards sectors considered vital for inclusive and sustainable economic growth.
MUST READ: Should you lend money to close siblings, relatives? How a ₹10 lakh loan turned into a burden