A method and switch element for assigning priority to pseudo virtual lanes ("PVL") using a fibre channel switch element is provided. The method includes, assigning received R_RDYs based on a PVL distribution scheme; and determining traffic congestion on a PVL if there is no credit available to transfer frames from the PVL. A minimum bandwidth feature is enabled to avoid lower priority PVLs from getting no credit for transmitting frames; and distributing credit and R_RDYs based on frame age bits, wherein a lower priority PVL gets credit if a frame is waiting in the PVL for a longer duration compared to a higher priority PVL. The switch element includes, a PVL module having credit counters for plural PVLs; and a timer that monitors frame traffic for each PVL lane. If a PVL gets congested, then a state machine adjusts priority of R_RDY distribution scheme of other PVLs to transmit frames.