RBI Proposes Rs 100-Crore Priority Sector Lending Limit for Agriculture Infrastructure and Food Processing

The Reserve Bank of India (RBI) has issued comprehensive draft directions proposing that bank credit of up to Rs 100 crore per borrower for agriculture infrastructure as well as food and agro-processing activities qualify under Priority Sector Lending (PSL).

The proposals form part of the draft Reserve Bank of India (Commercial Banks – Priority Sector Lending – Targets and Classification) Directions, 2026, released on November 5, 2026. As part of an ongoing regulatory drive to consolidate and streamline rules across different regulated entities, the central bank has placed entity-wise draft guidelines in the public domain and invited stakeholder feedback through November 26, 2026.

Headline Caps and Sub-Targets Retained

Under the proposed framework, the RBI has left the overarching PSL targets for domestic scheduled commercial banks unchanged:

• Overall Priority Sector Target: Retained at 40% of Adjusted Net Bank Credit (ANBC) or the credit equivalent of off-balance sheet exposures (CEOBSE), whichever is higher.
• Agriculture Lending: Held at 18% of ANBC or CEOBSE.
• Micro Enterprises: Kept at a mandated sub-target of 7.5%.

Expanding Outlays for Agro-Logistics and Processing

To accelerate post-harvest value addition and reduce agricultural produce wastage, the draft norms set an aggregate sanctioned credit cap of Rs 100 crore per borrower from the banking system for agriculture infrastructure.

Eligible Agriculture Infrastructure Activities:

• Construction of storage facilities, including warehouses, godowns, market yards, and cold storage units.
• Soil conservation and watershed development projects.
• Establishment of compressed biogas (CBG) plants linked to agricultural operations.

In parallel, loans directed toward food and agro-processing setups will independently qualify for priority sector classification up to an aggregate sanctioned limit of Rs 100 crore per borrower from the banking system.

Support for Farmer Collectives and Allied Activities

The central bank has also fine-tuned thresholds across agricultural borrower categories to bolster grassroots farm enterprises:

• Farmer Producer Organisations (FPOs) and Collectives: Loans to corporate farmers, FPOs, partnership firms, and cooperatives engaged in specified agricultural activities will be eligible for PSL classification up to an aggregate limit of Rs 4 crore per borrower.
• Allied Agricultural Activities: The draft proposes that loans of up to Rs 2.5 lakh extended to individuals solely engaged in allied activities—such as dairy, poultry, and fisheries—will be categorised under the small and marginal farmers (SMF) basket without requiring any landholding criteria.

Broader PSL Adjustments: Education and Social Avenues

Beyond the farm economy, the draft directions address human capital financing by proposing that individual education loans of up to Rs 25 lakh, including facilities extended for vocational training courses, qualify for priority sector categorization. The document also updates norms governing housing credit limits and renewable energy project financing.

Market and Sectoral Implications

For Indian commercial lenders, establishing an explicit Rs 100-crore threshold for agricultural infrastructure and processing facilities provides headroom to originate larger, commercially viable ticket sizes while remaining compliant with their 18% farm lending obligations. Historically, banks frequently relied on Priority Sector Lending Certificates (PSLCs) or contributed to rural infrastructure funds to manage shortfalls. By opening the PSL classification window to modern cold-storage operators, supply chain aggregators, and biogas developers, the RBI's draft guidelines are expected to accelerate corporate balance-sheet investments into India's rural logistics and processing ecosystem.