RBI Priority Sector Lending Draft Directions 2026: Five RE-Wise Drafts, Comments Open Till 26 November

The Reserve Bank of India has put five draft Directions on Priority Sector Lending (PSL) up for public comment — and the headline is what has not changed. The press release headed "Consolidation of Instructions Related to Priority Sector Lending – Drafts for Comments" — RBI Press Release 2026-2027/1447, dated 5 November 2026 — places one draft Direction per regulated-entity type on the RBI website: Commercial Banks; Small Finance Banks; Local Area Banks; Regional Rural Banks; and Urban Co-operative Banks, each titled "(Priority Sector Lending – Targets and Classification) Directions, 2026". Comments may be submitted by 26 November 2026 through the 'Connect 2 Regulate' section of the RBI website or by email with the subject line 'Feedback on [full name of the draft Direction / (including the type of Regulated Entity)]'.

In plain business-owner language: if you borrow under priority sector lending — farmer, small business, student, homebuyer or start-up — your loan limits are not changing in this draft. What is changing is the rulebook: RBI is consolidating years of scattered instructions into five clean, entity-wise Directions, and anything left out will be repealed once they are issued.

What RBI has actually proposed

The press release frames the exercise as consolidation, not reform: RBI has reviewed the extant PSL guidelines "as part of the ongoing effort towards consolidation of various instructions issued from time to time" and proposes Directions RE-wise — one per entity type, rather than a single master document.

That split is the key structural point. Until now, PSL has been governed by a single set of Master Directions — the 2025 Directions, effective 1 April 2025 and updated on 11 September 2026. The 2026 package replaces it with five separate Directions. This article is based on the Commercial Banks draft, read in full (51 pages); the other four drafts were not read.

Two clauses carry the real consequences. First, the repeal clause (para 95): the 2025 Directions stand repealed from the date the new Directions come into force — except for savings for acts done, obligations incurred, penalties, pending proceedings and rights already acquired. Para 96 adds that nothing in the new Directions affects anything done or omitted before the repeal, or anything exempted under the repealed Directions. Second, the press release warns that instructions not included in the consolidated drafts "would be repealed consequent to the issuance of the Directions", notified separately. Anything left out disappears — so the consultation matters even for provisions that look unchanged. The draft's transition (para 7): loans already categorised under the erstwhile Master Direction stay eligible till maturity. Para 2, as drafted, says the Directions "shall come into force with immediate effect" once issued.

The limits stay where they are: draft vs current Directions

The first thing anyone checking the Commercial Banks draft against the 2025 Directions will notice is how little the numbers move. The targets and headline category limits are the same as in the current Master Directions:

The current 2025 Directions set higher overall targets for the others — 75% for RRBs, 60% for SFBs and 60% for UCBs — but whether those move in their own 2026 drafts is NOT CHECKED. Do not assume the 40% figure applies to them.

What the Commercial Banks draft sets out

Targets and measurement. Targets (para 11) are a percentage of ANBC (Adjusted Net Bank Credit) or CEOBSE, whichever is higher. ANBC (para 9) is net bank credit adjusted for PSL-shortfall deposits with NABARD, SIDBI, MUDRA and NHB, net PSLCs, eligible long-term infrastructure and affordable-housing bonds, and FCNR(B)/NRE advances qualifying for CRR/SLR exemption; CEOBSE follows the 2025 Concentration Risk Management Directions (para 10). Domestic commercial banks: total PSL 40%; agriculture 18% (14% Non-Corporate Farmers, of which 10% Small and Marginal Farmers); micro enterprises 7.5%; weaker sections 12%. Foreign banks with 20 branches and above carry the same targets. Foreign banks with fewer than 20 branches: total PSL 40%, export credit up to 32%, "not less than 8% shall be extended to any other priority sector", no separate sub-targets. A small farmer holds more than 1 hectare and up to 2 hectares; a marginal farmer, up to 1 hectare (para 23). Para 13 gives a 125% weight for districts with per-capita PSL below ₹9,000, and 90% above ₹42,000, up to FY 2026-27 (Annex IA and IB); foreign banks are exempt (para 13(4)). The weights are presented as set out in the draft; whether they existed in the 2025 Directions in the same form was not compared and is NOT CHECKED.

Category-wise limits. In agriculture: warehouse receipts up to ₹90 lakh (NWRs/eNWRs) and ₹60 lakh (other receipts); up to ₹4 crore against pledge/hypothecation of produce for up to 12 months (NWRs/eNWRs), ₹2.5 crore (other receipts) (para 18); ₹10 crore per borrowing entity to Farmer Producer Organisations/Companies (para 19) and for purchase of members' produce (para 20). For MSMEs (paras 24–35), eligibility runs by Udyam Registration and MSMED Act definitions, with no monetary per-borrower cap stated. Export credit (para 37): for domestic banks and foreign banks with 20 or more branches, incremental export credit over the preceding year up to 2% of ANBC or CEOBSE, sanctioned limit up to ₹50 crore per borrower; foreign banks with fewer than 20 branches may count export credit up to 32%. Housing (paras 39–40) is tiered by centre population — ₹50 lakh loan / ₹63 lakh cost cap (50 lakh+), ₹45 lakh / ₹57 lakh (10–50 lakh), ₹35 lakh / ₹44 lakh (below 10 lakh); repairs ₹15/12/10 lakh under the same caps. Weaker sections (para 48): up to ₹2 lakh to individual women beneficiaries and to artisans and village/cottage industries, ₹1 lakh to distressed persons other than farmers, alongside SC/ST borrowers, minorities and self-help groups.

On-lending, PSLCs and monitoring. On-lending (Chapter V, para 63) lets banks count lending through NBFCs — agriculture up to ₹10 lakh per borrower (term loans only) and micro and small enterprises up to ₹20 lakh — and through housing finance companies up to ₹20 lakh aggregate per borrower, capped overall at 5% of the bank's average PSL achievement of the four quarters of the previous financial year. Priority Sector Lending Certificates (Chapter IV, paras 49–55) come in four categories — PSL General, Small and Marginal Farmers, Agriculture, Micro Enterprises — sold only by banks with a shortfall in that category, minimum lot ₹1 crore in multiples of ₹1 crore. Monitoring (Chapter VI, paras 86–89) is quarterly: data within 15 days quarterly and 1 month annually; shortfalls go to NABARD, NHB, SIDBI and MUDRA (para 88). Interest on PSLC shortfall (para 90) is Bank Rate minus 2 points (shortfall under 5 points), minus 3 points (5 to under 10), minus 4 points (10 and above) — and minus 2 points with no overall shortfall but a sub-target shortfall. Para 93: no loan-related service charges on PSL loans up to ₹50,000. These mechanics are presented as set out in the draft, without a claim that any of them is new.

Who is affected

• Commercial banks — the draft applies to all commercial banks excluding Small Finance Banks, Payment Banks, Regional Rural Banks and Local Area Banks, including corresponding new banks, the State Bank of India and its subsidiaries. They must re-map PSL reporting and compliance once issued.
• Foreign banks — those with 20 branches and above follow the domestic targets; those with fewer than 20 branches follow the 40% total with the export-credit-heavy mix, exempt from the district weights.
• Small Finance Banks, Local Area Banks, Regional Rural Banks and Urban Co-operative Banks — each gets its own draft Direction in this package; those four drafts were not read for this article.
• Borrowers in priority sectors — farmers (including small and marginal farmers), micro and small enterprises, exporters, students, homebuyers in smaller centres, start-ups, and weaker sections. Their limits are retained, and loans already categorised stay eligible till maturity.
• NBFCs and housing finance companies — on-lending through them counts towards banks' PSL achievement within the caps in the draft.
• Industry bodies and banks' PSL and legal teams — the repeal of un-included instructions makes this the moment to check whether a relied-upon instruction survives in the consolidated text.

What to do next

To comment on the drafts (by 26 November 2026):

1. Read the draft for your entity type — the Commercial Banks draft is on the RBI website (link in Sources below); the other drafts are on the same press-release page.
2. Submit through 'Connect 2 Regulate' on the RBI website, following the hyperlink against each document — or by email, with the subject line 'Feedback on [full name of the draft Direction / (including the type of Regulated Entity)]'.
3. Check what is missing, not just what is present — instructions not included will be repealed on issuance, so flag any instruction your institution relies on that does not appear in the draft text.

For banks' PSL and compliance teams:

1. Map the 2025 Directions against the draft for your entity type, clause by clause — the draft contains no enumerated statement of changes, so the comparison must be done manually.
2. Check the district lists in Annex IA and IB against your branch footprint — the 125% and 90% weights change the value of lending in low- and high-PSL-flow districts up to FY 2026-27.
3. Review PSLC and shortfall mechanics — the four PSLC categories, the ₹1 crore lot size and the Bank Rate-linked shortfall interest — for your quarterly planning.
4. Do not change borrower-facing limits now — these are drafts, not in force; existing loans stay eligible till maturity.

What the drafts do not cover

The following are marked NOT CHECKED — the documents read do not address them, or they were not compared:

• The Small Finance Banks, Local Area Banks, Regional Rural Banks and Urban Co-operative Banks draft Directions. NOT CHECKED — only the Commercial Banks draft was read in full; their targets and limits may differ.
• Whether the district weights, PSLC lot size, shortfall interest, on-lending caps, warehouse-receipt limits, export-credit cap and service-charge waiver existed in the 2025 Directions in the same form. NOT CHECKED — presented as set out in the draft, not as changes, because no item-by-item comparison was done.
• The email address for submitting comments. NOT CHECKED — the press release as read states comments may be sent by email with a specified subject line, but no address appears in the text read; use the 'Connect 2 Regulate' link on the RBI page hosting the drafts.
• Targets for RRBs, SFBs and UCBs in their own 2026 drafts. NOT CHECKED — the 75% / 60% / 60% figures above are from the current 2025 Directions, not the new drafts.

FAQs

What is RBI's PSL draft Directions 2026?
RBI's press release "Consolidation of Instructions Related to Priority Sector Lending – Drafts for Comments" (PR 2026-2027/1447, 5 November 2026) proposes five draft Directions for 2026 — one per entity type — consolidating the existing PSL instructions entity-wise. The 2025 Directions would be repealed when the new Directions are issued.

What is the last date to comment on the RBI PSL draft Directions?
26 November 2026 — through the 'Connect 2 Regulate' section of the RBI website, or by email with the subject line 'Feedback on [full name of the draft Direction / (including the type of Regulated Entity)]'.

Have PSL targets changed in the 2026 draft?
No — not in the Commercial Banks draft. The total PSL target stays at 40% of ANBC or CEOBSE for domestic commercial banks, with agriculture at 18% (14% non-corporate farmers, of which 10% small and marginal farmers), micro enterprises at 7.5% and weaker sections at 12%. The targets in the SFB, LAB, RRB and UCB drafts were not read.

What is the housing loan limit under PSL in the draft?
Per family, for purchase or construction: ₹50 lakh with a ₹63 lakh dwelling-unit cost cap (population 50 lakh and above); ₹45 lakh and ₹57 lakh (10 lakh to under 50 lakh); ₹35 lakh and ₹44 lakh (below 10 lakh). Repairs and renovation: ₹15 lakh, ₹12 lakh and ₹10 lakh respectively, under the same caps.

What is the education loan limit under PSL?
₹25 lakh per individual, for studies in India and abroad — retained from the 2025 Directions.

What happens to the 2025 PSL Directions?
The Commercial Banks draft repeals the 2025 Directions when the new Directions come into force, with savings for acts done, obligations incurred, penalties, pending proceedings and rights under them. Loans categorised stay eligible till maturity. Instructions not included in the consolidated drafts will also be repealed on issuance, and notified separately.

Do the drafts apply to small finance banks and regional rural banks?
Each gets its own draft Direction — the Commercial Banks draft expressly excludes SFBs, Payment Banks, RRBs and LABs. This article is based on the Commercial Banks draft and the press release; the other draft texts were not read.

Related reading

• RBI Priority Sector Lending Third Amendment Directions 2026

Sources

• Primary source: Reserve Bank of India — "Consolidation of Instructions Related to Priority Sector Lending – Drafts for Comments", Press Release 2026-2027/1447, 5 November 2026 — rbi.org.in
• Draft Direction (Commercial Banks): Reserve Bank of India (Commercial Banks – Priority Sector Lending – Targets and Classification) Directions, 2026 — rbidocs.rbi.org.in (official draft PDF, 51 pages)
• Current Directions (for comparison): Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2025, effective 1 April 2025, updated 11 September 2026 — rbi.org.in

Last verified by team: 6 November 2026, against the official RBI press release, the Commercial Banks draft PDF and the 2025 Directions. Unaddressed or uncompared points are marked "NOT CHECKED" above.