RBI Overhauls Priority Sector Lending Framework: Detailed Analysis of the 2026 Amendment Directions
The Reserve Bank of India (RBI) has initiated a significant restructuring of the banking regulatory landscape with the issuance of the Reserve Bank of India (Priority Sector Lending – Targets and Classification) (Amendment) Directions, 2026. Dated January 19, 2026, this notification (RBI/FIDD/2025-26/196) introduces comprehensive changes to the existing Master Directions.
These amendments are designed to streamline compliance, adjust lending targets for specific banking categories, and integrate updated regulatory frameworks regarding capital adequacy and exposure norms. The changes are effective immediately and impact Commercial Banks, Small Finance Banks (SFBs), Regional Rural Banks (RRBs), and Urban Co-operative Banks (UCBs).
This article provides a detailed breakdown of the amendments, categorizing them into structural changes, target revisions, and operational compliance updates.
1. Revision of Targets and ANBC Computation
The core of the Priority Sector Lending (PSL) mechanism relies on the computation of Adjusted Net Bank Credit (ANBC). The 2026 Directions introduce critical modifications to how this is calculated and how targets are applied.
Adjustments to ANBC and Off-Balance Sheet Exposures
The methodology for determining the eligible amount for exemptions has been aligned with newer regulations.
- Infrastructure and Affordable Housing: The exemption criteria for long-term bonds issued for these sectors have been modified. Banks must now refer to the
Reserve Bank of India (Resource Raising Norms) Directions, 2025for applicable norms for Commercial Banks and SFBs. - FCNR(B) and NRE Deposits: The RBI has clarified the calculation for incremental advances generated from Foreign Currency Non-Resident (Bank) and Non-Resident (External) deposits. The deduction from ANBC is capped at the amount of incremental deposits eligible for CRR/SLR exemptions. If the difference in outstanding amounts (compared to the 2013/2014 base dates) is zero or negative, no deduction is permitted.
- **Off-Balance Sheet Exposures (CEOBSE)😗* The calculation of Credit Equivalent of Off-Balance Sheet Exposures has been updated to reference the
Reserve Bank of India (Commercial Banks – Concentration Risk Management) Directions, 2025and theReserve Bank of India (Prudential Norms on Capital Adequacy) Directions, 2025.