RBI Revises Priority Sector Lending Norms: New Targets and Classifications Announced

The Reserve Bank of India (RBI) has announced significant amendments to Priority Sector Lending (PSL) guidelines, effective January 19, 2026. The move comes as part of RBI’s ongoing efforts to align credit distribution with national development priorities and address lapses in loan classification flagged during supervisory reviews.

The revised directions redefine sectoral targets, expand eligible categories, and emphasize stricter compliance to ensure transparency in reporting. Banks are expected to recalibrate their lending portfolios to meet the updated requirements.

Key Highlights:

• Revised Targets: Enhanced credit allocation for agriculture, MSMEs, and renewable energy projects.
• Classification Updates: Stricter definitions to prevent misclassification of loans, especially in agriculture.
• Compliance Measures: Banks must maintain accurate reporting; lapses will attract provisioning requirements.
• Development Focus: Supports inclusive growth by channeling funds to underserved sectors.
• Implementation: Effective immediately, with monitoring under SEBI and RBI’s supervisory framework.

These amendments reflect RBI’s commitment to ensuring that PSL remains a robust tool for equitable credit distribution, while reinforcing accountability among banks.

Sources: Reserve Bank of India Notifications, Outlook Money – RBI Flags PSL Lapses, BusinessWorld policy updates.