The Reserve Bank of India (RBI) has proposed allowing bank loans of up to ₹100 crore per borrower for eligible agriculture infrastructure and food and agro-processing activities to qualify as priority sector lending (PSL). The proposal is part of the central bank’s draft Priority Sector Lending Directions, 2026, which seek to update the framework governing how banks allocate credit to sectors considered important for India’s economic and social development.
The draft also proposes changes to eligibility rules for small and marginal farmers, education loans, housing finance, social infrastructure and renewable energy projects. While the RBI has retained the overall priority sector lending target at 40% of eligible bank credit, the proposed changes could expand access to institutional financing for agricultural infrastructure developers, food processors, healthcare providers and other eligible borrowers. These are proposed rules, not yet final regulations.
RBI Proposes ₹100 Crore Loan Limit for Agriculture Infrastructure
One of the most significant changes in the draft is the proposed ₹100 crore aggregate sanctioned loan limit per borrower for eligible agriculture infrastructure projects.
The proposal is intended to make larger infrastructure investments eligible for priority sector classification. These projects can require substantial capital because they involve land development, storage facilities, processing infrastructure and specialised equipment.
Eligible activities identified in the proposal include:
- Construction of warehouses and cold storage facilities.
- Soil conservation and watershed development.
- Setting up compressed biogas plants.
- Other specified agricultural infrastructure activities covered by the draft framework.
Under priority sector lending rules, banks must direct a prescribed proportion of their lending towards sectors such as agriculture, micro enterprises, education, housing and renewable energy.
Allowing larger eligible loans to qualify could encourage banks to finance infrastructure projects that support agricultural production, storage and distribution.
Food and Agro-Processing Loans Also Get a ₹100 Crore Limit
The RBI has proposed an aggregate sanctioned limit of ₹100 crore per borrower for loans to food and agro-processing activities.
Food processing businesses often require substantial investment in machinery, cold-chain facilities, packaging systems, storage infrastructure and transportation networks. Access to larger bank loans under the priority sector framework could support companies looking to expand processing capacity and improve supply-chain efficiency.
The proposal is relevant to businesses involved in activities such as:
- Processing agricultural produce.
- Food preservation and packaging.
- Storage and handling of agricultural products.
- Processing of farm-based raw materials.
- Other eligible food and agro-processing activities.
The proposed limit is an aggregate sanctioned limit per borrower from the banking system, rather than a separate ₹100 crore allowance from every bank.
Corporate Farmers, FPOs and Cooperatives Face a Separate ₹4 Crore Limit
The draft also proposes a separate limit for specified agricultural lending to corporate farmers, Farmer Producer Organisations (FPOs), partnership firms and cooperatives.
Loans to these entities for eligible agricultural activities would qualify as priority sector lending up to an aggregate limit of ₹4 crore per borrower.
This is distinct from the proposed ₹100 crore limits for agriculture infrastructure and food and agro-processing projects.
The distinction matters because the RBI is proposing different lending thresholds for different categories of borrowers and activities.
FPOs, for example, can use institutional finance to aggregate produce, purchase inputs, improve marketing arrangements and strengthen the bargaining power of farmers. A separate eligibility limit provides a framework for banks to classify such lending under the agriculture category.
Small and Marginal Farmer Eligibility to Expand
The RBI has also proposed changes intended to make priority sector classification more accessible to individuals engaged in agricultural activities.
Under the draft, loans of up to ₹2.5 lakh to individuals solely engaged in allied agricultural activities could qualify under the small and marginal farmers category without requiring landholding criteria.
Allied activities include businesses such as dairy farming, fisheries, animal husbandry, poultry, beekeeping and sericulture.
This is significant because many people involved in these activities may not own agricultural land. Requiring conventional landholding documentation can make it difficult for such borrowers to access formal credit.
The proposed change could help banks recognise eligible lending to individuals whose livelihoods depend on agricultural activities beyond crop cultivation.
RBI Retains the 40% Priority Sector Lending Target
The RBI has retained the overall priority sector lending requirement at 40% of a bank’s adjusted net bank credit (ANBC) or the credit equivalent of off-balance-sheet exposures, whichever is higher.
The draft also retains the existing broad sectoral targets.
| Priority sector category | Proposed target |
|---|---|
| Overall priority sector lending | 40% |
| Agriculture | 18% |
| Micro enterprises | 7.5% |
These targets mean eligible banks must maintain prescribed levels of lending to priority sectors. The proposal changes the classification and eligibility rules for certain loans rather than reducing the overall lending obligation.
The agriculture target remains particularly important because it directs a substantial share of bank credit towards farmers, agricultural infrastructure and related activities.
Education Loan Eligibility Limit Proposed at ₹25 Lakh
The RBI has proposed allowing individual education loans of up to ₹25 lakh, including loans for vocational courses, to qualify under priority sector lending.
The proposed change could expand the range of education financing that banks can count towards their PSL obligations.
Vocational education is an important part of the proposal because it includes training programmes designed to provide practical and employment-oriented skills.
For banks, the higher eligibility ceiling could create additional opportunities to finance students pursuing higher education and professional training.
For borrowers, however, priority sector classification does not automatically mean lower interest rates, guaranteed loan approval or government subsidies. The bank’s normal credit assessment and applicable loan conditions would continue to matter.
Housing Loan Limits Revised Across City Categories
The draft also proposes changes to housing loan eligibility under priority sector lending.
The proposed limits for loans used to purchase or construct a dwelling unit vary according to the population of the location.
| Centre population | Proposed housing loan limit |
|---|---|
| 50 lakh and above | ₹50 lakh |
| 10 lakh to below 50 lakh | ₹45 lakh |
| Below 10 lakh | ₹35 lakh |
The RBI has also proposed separate limits for loans used to repair damaged dwelling units.
| Centre population | Proposed repair loan limit |
|---|---|
| 50 lakh and above | ₹15 lakh |
| 10 lakh to below 50 lakh | ₹12 lakh |
| Below 10 lakh | ₹10 lakh |
These limits determine whether eligible housing loans can be classified under the priority sector framework. They should not be confused with a universal cap on the amount a bank can lend for housing.
Higher Limits for Social Infrastructure and Renewable Energy
The draft proposes higher eligible loan limits for selected social infrastructure projects.
Loans of up to ₹8 crore per borrower for establishing schools, drinking water facilities and sanitation infrastructure could qualify as priority sector lending.
For healthcare facilities in Tier 2 to Tier 6 centres, the proposed limit is ₹12 crore per borrower.
The RBI has also proposed changes to renewable energy lending eligibility:
| Renewable energy category | Proposed loan limit |
|---|---|
| Renewable energy-based power generation projects and public utilities | ₹35 crore |
| Individual households | ₹10 lakh |
These provisions are intended to support financing for infrastructure that provides essential services and expands access to cleaner energy.
RBI Proposes Changes to On-Lending and Priority Sector Certificates
The draft also introduces changes to how banks can meet priority sector lending requirements through financial intermediaries.
The RBI has proposed an overall cap of 5% of a bank’s average priority sector lending achievement over the four quarters of the previous financial year for loans to NBFCs, housing finance companies and the National Cooperative Development Corporation (NCDC) for onward lending.
The proposed cap would not apply to lending to NBFC-microfinance institutions and other microfinance institutions that are members of an RBI-recognised self-regulatory organisation.
Another proposed change concerns Priority Sector Lending Certificates (PSLCs). These certificates allow banks with surplus priority sector lending achievement to sell certificates to banks that have a shortfall.
The draft proposes standard PSLC trading lots of ₹25 lakh and multiples of that amount, with fees determined by market conditions. The mechanism transfers the benefit of priority sector achievement without transferring the underlying loan assets or credit risk.
The RBI has also proposed monitoring banks’ compliance with PSL targets every calendar quarter rather than relying only on annual assessments.
The Bigger Picture
The proposed changes reflect the RBI’s effort to make priority sector lending more responsive to the financing requirements of India’s economy. Larger loan limits for agriculture infrastructure and food processing could help banks support projects that improve storage, reduce wastage and strengthen agricultural supply chains.
The changes also extend beyond agriculture. Higher eligibility limits for education, housing, healthcare and renewable energy could broaden the range of borrowers and projects receiving priority sector credit classification.
For banks, the challenge will be to meet their lending targets while maintaining credit quality. For businesses and borrowers, the key benefit will depend on whether the revised eligibility framework translates into greater access to affordable and timely financing.
Looking Ahead
The RBI’s next step will be to finalise the draft Priority Sector Lending Directions, 2026, after considering stakeholder feedback. The proposed framework states that the new directions will come into force immediately once issued in final form. Until then, banks must continue following the applicable existing PSL rules.
If finalised, the changes could influence how banks allocate credit across agriculture, food processing, education, housing, social infrastructure and renewable energy. The ₹100 crore proposed limit for eligible agriculture infrastructure and food-processing loans is particularly important because it could make larger projects eligible for priority sector classification while maintaining the overall 40% lending requirement.
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