Priority Sector Lending Targets Revised By RBI; NCDC Loans Now Eligible

New Delhi, Jan 20 (KNN) The Reserve Bank of India (RBI) has issued the Priority Sector Lending – Targets and Classification (Amendment) Directions, 2026, updating the 2025 Master Directions to align with recent regulatory changes, clarify operational provisions, and refine priority sector targets across banks.

NCDC Now Eligible for On-Lending
A key change is the inclusion of the National Cooperative Development Corporation (NCDC) under the priority sector on-lending framework.

Loans extended by banks to NCDC will now qualify as priority sector credit, aimed at expanding institutional finance to cooperative societies in agriculture and allied activities.

The RBI has strengthened compliance, reporting, and audit requirements to prevent misuse.

Clarifications on Credit Computation
The amendments refine how Adjusted Net Bank Credit (ANBC) is calculated, including treatment of exemptions linked to long-term infrastructure and affordable housing bonds.

Banks may issue unsecured, rupee-denominated bonds with a minimum seven-year maturity, exempt fr0m Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). A detailed formula has also been prescribed for incremental advances arising fr0m Foreign Currency Non-Resident (Bank) and Non-Resident External (NRE) deposits.

Enhanced Oversight of On-Lending
Non-Banking Financial Companies (NBFCs), Housing Finance Companies (HFCs), and NCDC must now provide auditor certificates confirming priority sector eligibility of end-use funds. Bank loans to NCDC will qualify only with quarterly certification by CAG-empanelled auditors.

The overall on-lending cap to NBFCs, HFCs, and NCDC remains 5 per cent of the previous year’s priority sector lending.

Updated Exposure Norms and Bank Targets
RBI has revised credit equivalent off-balance-sheet exposures under the Large Exposures Framework.

Priority sector targets have been refined: for small finance banks (SFBs) to 60 per cent of ANBC or credit equivalent exposure (down fr0m 75 per cent), and for regional rural banks (RRBs), lending to medium enterprises, social infrastructure, and renewable energy capped at 15 per cent of ANBC.

PSLC Framework Formalised
The Priority Sector Lending Certificate (PSLC) framework has been codified, with four categories—Agriculture, Small & Marginal Farmers, Micro Enterprises, and General—linked to specific targets.

Banks can issue PSLCs up to 50 per cent of their previous year’s achievement without holding underlying assets, provided year-end targets are met. All PSLCs expire on March 31.

Other Revisions
The RBI has updated rules for export credit, microfinance loans, government-sponsored schemes, co-lending, reporting timelines, interest-rate norms, and service charges for small-value loans.

Some districts have been removed fr0m the list of special category areas based on updated regional classifications.

(KNN Bureau)