Justification of PSL Classification explains why a loan qualifies for Priority Sector Lending treatment. In credit operations, PSL tagging must be based on the borrower’s activity, purpose of finance, regulatory category, loan size, and applicable eligibility criteria. For example, an MSME manufacturing loan may qualify under one category, while a real-estate-linked exposure or non-eligible purpose may not. Proper justification helps reporting teams, auditors, and regulators understand the classification decision. It matters because wrong PSL tagging can affect regulatory compliance and portfolio reporting. The common caution is to avoid copying generic text for every case; the justification should mention the exact borrower activity, facility purpose, evidence reviewed, and policy basis used at the time of classification.