Circular no. RBI/FIDD/2025-26/196 FIDD.CO.PSD.BC.No.11/04.09.001/2025-26 dated: 19.01.2026
1. Introduction: RBI Revises Priority Sector Lending Norms
The Reserve Bank of India (RBI) has issued the Priority Sector Lending (Amendment) Directions, 2026, through Circular No. RBI/FIDD/2025-26/196 dated 19 January 2026. These amendments aim to bring clarity, consistency, and regulatory alignment in the computation of Priority Sector Lending (PSL) targets across different categories of banks.
2. ANBC Computation: Key Clarifications Introduced
Under the amended framework, RBI has refined the calculation of Adjusted Net Bank Credit (ANBC). Certain long-term bonds and advances funded through FCNR(B) and NRE deposits have been excluded from ANBC computation. This clarification reduces ambiguity and ensures that PSL targets are calculated on a more accurate and comparable base.
3. Treatment of Off-Balance Sheet Exposures
The amended directions also align the treatment of off-balance sheet exposures with the updated prudential norms. RBI has ensured that such exposures are considered uniformly across banking institutions, thereby preventing inconsistencies in PSL reporting and compliance arising from divergent accounting or regulatory interpretations.
4. Guidance for Small Finance Banks (SFBs)
Special provisions have been introduced for Small Finance Banks (SFBs) transitioning into the PSL framework. The directions clarify the treatment of grandfathered loans, prevent double-counting of eligible advances, and specify that PSL targets for SFBs shall be fixed based on their first audited balance sheet post-transition.
5. Conclusion: Enhancing Uniformity and Regulatory Clarity
The RBI Priority Sector Lending (Amendment) Directions, 2026, strengthen the PSL framework by standardising ANBC computation, aligning exposure treatment, and providing clear transition guidance for SFBs. These changes are expected to improve regulatory consistency, transparency, and ease of compliance for banks while maintaining the policy objective of credit flow to priority sectors.
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