Reserve Bank of India (Priority Sector Lending – Targets and Classification) (Amendment) Directions, 2026

RBI/FIDD/2025-26/196
FIDD.CO.PSD.BC.No.11/04.09.001/2025-26
 

January 19, 2026

Reserve Bank of India (Priority Sector Lending – Targets and Classification) (Amendment) Directions, 2026
 

Please refer to the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2025 (hereinafter referred to as “the Directions”).
 

2. On a review, in exercise of the powers conferred by Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949, and all other provisions / laws enabling the Reserve Bank of India (hereinafter called the Reserve Bank) in this regard, the Reserve Bank, being satisfied that it is necessary and expedient in the public interest to do so, hereby issues the Amendment Directions hereinafter specified.
 

3. The Amendment Directions modify the Directions as below:

i. Item no. V in the table at paragraph 6.1 shall be partially modified as below:
 

“Eligible amount for exemptions on issuance of long-term bonds for infrastructure and affordable housing as per circular DBOD.BP.BC.No.25/08.12.014/2014-15 dated July 15, 2014 Reserve Bank of India (Resource Raising Norms) Directions, 2025 as applicable to Commercial Banks and Small Finance Banks.”
 

ii. Paragraph 6.1 shall be partially modified by adding a footnote to item VI of the table at para 6.1:
 

“The incremental advances extended out of the resources generated from the eligible incremental FCNR(B)/NRE deposits is calculated as the difference between outstanding advances in India as on March 7, 2014 (June 13, 2014, in case of UCBs) and the Base Date (July 26, 2013). The amount to be excluded from ANBC for computation of priority sector targets will not exceed incremental FCNR (B) / NRE deposits eligible for exemption from maintenance of CRR / SLR in terms of the circulars mentioned above. In case, the difference in the amount outstanding is zero or negative, no amount would be eligible for deduction from ANBC for the purpose of arriving at the priority sector lending targets.”
 

iii. Paragraph 6.2 shall be partially modified as below:
 

“For the purpose of calculation of Credit Equivalent of Off-Balance Sheet Exposures (CEOBSE), banks shall be guided by the circular on ‘Large Exposures Framework’ issued by Department of Regulation, RBI vide DBR.No.BP.BC.43/21.01.003/2018-19 dated June 03, 2019 and as updated from time to time. UCBs shall be guided by the relevant provisions of the Master Circular dated April 20, 2023 on ‘Prudential Norms on Capital Adequacy - Primary (Urban) Co-operative Banks (UCBs)’ issued by Reserve Bank of India Reserve Bank of India (Commercial Banks - Concentration Risk Management) Directions, 2025, and Reserve Bank of India (Prudential Norms on Capital Adequacy) Directions, 2025, as applicable to Small Finance Banks, Urban Co-operative Banks and Regional Rural Banks. In the case of Local Area Banks, for the purpose of calculation of credit risk exposure attached to off-balance sheet items, banks may refer to Reserve Bank of India (Local Area Banks – Prudential Norms on Capital Adequacy) Directions, 2025.”
 

iv. Paragraph 6.3 shall be partially modified as below:

“SFBs shall be further guided by Para 6.5 (ii to vii) of the Operating Guidelines for Small Finance Banks issued by Department of Regulation (RBI/2016-17/81 DBR.NBD. No.26/16.13.218/2016-17 dated October 06, 2016), by the following pertaining to treatment of grandfathered loans, for computation of ANBC:
 

1. The provisions in Paragraph C.10.33 of Reserve Bank of India (Small Finance Banks – Licensing) Guidelines, 2025 will apply to cases where an existing NBFC/MFI sets up a SFB and transfers its business to the SFB. apart from conversion cases.
    

2. The lending banks will be permitted to avail the PSL classification for the loans made to such NBFCs, as long as the assets financed out of such loans are PSL eligible assets. This dispensation to the lending banks would be extended only up to the extent of actual outstanding balance supported by existing underlying assets as on the opening balance sheet of the SFB, and only till repayment of underlying loans.
    

3. The assets financed out of the above loans from the banks would not be reckoned for the ANBC for priority sector calculation for the SFB, to the extent the lending bank enjoys PSL status on such grandfathered loans.
    

4. Any fresh assets created out of such outstanding grandfathered lending or any fresh assets created by the SFB post commencement of operations, in general, would be reckoned in the ANBC of the SFBs and the PSL norms as applicable to SFBs would kick in.
    

5. The above treatment would be applicable for grandfathered borrowings in the cases of converting entities as well.
    

6. The first audited balance sheet as on March 31st post commencement of operations of the SFB would form the basis for the first PSL target for the SFB (for the subsequent year).”

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