The Priority-Sector Draft Moves the Test From Sanction to Disbursement: Agri Loans Must Now Prove the Borrower, the Crop and the Receipt
A priority-sector loan routed through an intermediary used to count, in practice, when the bank sanctioned it. Under the draft Directions the Reserve Bank released on 5 November, that loan counts only when the intermediary has actually disbursed the money to the end borrower, and only while the money stays in priority-sector assets. The five draft Directions, one per bank type, are open for comment until 26 November 2026. The headline targets barely move. The proof burden does, and for agriculture books it now runs down to the field.
Five rulebooks, and the targets stay where they were
This is a consolidation, and the Reserve Bank says so plainly: the drafts gather instructions issued over the years into one text per bank type; anything left out will be repealed when the final Directions issue. A compliance team that cannot find a familiar clause in its own draft should treat it as gone, not misplaced. What has not changed is the arithmetic. Commercial banks keep a 40 per cent total target, with 18 per cent for agriculture, inside which 14 per cent is set for non-corporate farmers and 10 per cent for small and marginal farmers. Regional rural banks sit at 75 per cent for RRBs, small finance banks sit at 60 per cent total, and the urban co-operative bank draft, also at 60 per cent, carries no agriculture sub-target. The risk here is not a moved target. It is a stricter test for what counts toward the target you already have.
| Draft PSL targets, 2026 drafts (% of ANBC or CEOBSE, whichever is higher) | Commercial banks | Regional rural banks | Small finance banks | Urban co-operative banks |
|---|---|---|---|---|
| Total priority sector | 40 | 75 | 60 | 60 |
| Agriculture | 18 | 18 | 18 | No separate target |
| Non-corporate farmers (within agriculture) | 14 | 14 | 14 | — |
| Small and marginal farmers (within agriculture) | 10 | 10 | 10 | — |
| Micro enterprises | 7.5 | 7.5 | 7.5 | 7.5 |
| Weaker sections | 12 | 15 | 12 | 12 |
Draft Directions for each bank type, Reserve Bank of India, 5 November 2026 — consultation drafts, not final Directions. Farmioc.
On-lending: sanctioned is no longer classified
The sharpest change sits in the on-lending chapter. Classification is permitted only when the NBFC or housing finance company has disbursed to the ultimate beneficiary after receiving the bank's funds, and only while those funds remain deployed in priority-sector assets. The intermediary has to flag these loans in its own systems so auditors and, for NBFCs, Reserve Bank supervisors can verify them. The bank must collect six beneficiary-level fields at a minimum: name, amount sanctioned, amount outstanding, tenure, disbursement date and PSL category. A bank that today holds an NBFC's portfolio certificate will need loan-level data instead. The channel also has a ceiling: on-lending through NBFCs, HFCs and NCDC counts only up to a five per cent cap, set against the bank's average priority-sector achievement over the previous financial year's four quarters. Lending through microfinance institutions sits outside that cap, and NBFC term lending for agriculture remains capped at ₹10 lakh per borrower. None of this stops the channel. It reprices the paperwork inside it.
A crop loan now has to show the crop
The common guidelines at the end of the commercial banks draft read like a supervisor's checklist, because that is what they are. For crop loans, banks must record where the land is, what crop is on it, any hypothecation, and evidence that the sanction followed the scale of finance. They must also keep records of field visits made to monitor end use. Where land records or lease deeds do not exist — landless labourers, sharecroppers — the bank has to hold alternative verifiable records instead of a gap in the file. Gold gets its own clarification. A farm loan does not lose priority-sector status because the collateral is gold jewellery, but it must be sanctioned on the scale of finance and a proper assessment of the credit the activity needs, not solely on collateral value. A gold-backed crop loan is not banned. A gold-valued one is. The cost of getting this wrong sits in the same draft: misclassifications identified by the Department of Supervision are adjusted out of achievement for its year, with the shortfall parked in the NABARD, NHB, SIDBI and MUDRA funds at Bank Rate minus two to four percentage points. Classification errors used to be a reporting embarrassment. In this draft they are a priced outcome.
The ceilings that frame the agriculture book
Warehouse-receipt finance keeps its two-tier structure. An individual farmer can borrow up to ₹90 lakh against eNWRs and negotiable warehouse receipts, and up to ₹60 lakh against other warehouse receipts, for no more than 12 months. Corporate farmers, FPOs and co-operatives face a ₹4 crore aggregate limit per borrowing entity, with pledge loans up to ₹4 crore against negotiable receipts and ₹2.5 crore against other receipts. Storage sits in the infrastructure bucket: loans for warehouses, godowns, silos and cold chains qualify up to ₹100 crore per borrower across the banking system, and the draft makes the bank police it — take a declaration of the borrower's loans from other banks for the same activity, and check the aggregate independently. Food and agro-processing carries the same limit; agri start-ups qualify up to ₹50 crore. At the small end, one definition widens and another narrows. Individuals solely in allied activities — dairy, fisheries, poultry — now count toward the small and marginal farmer sub-target on ₹2.5 lakh allied-activity loans with no landholding test. But a partnership firm or company whose partners hold up to two hectares is expressly not a small or marginal farmer. District weights carry an expiry date: incremental credit in districts with per-capita flow below ₹9,000 still earns a 125 per cent weight, districts above ₹42,000 earn 90 per cent, and the lists run only to the end of FY 2026-27. Only credit the bank disburses directly earns the weight — bought portfolios and on-lending do not.
The decision
For bank credit and compliance teams: the comment window is the cheap moment to act. Map every agriculture product against your own bank-type draft before 26 November, and file comments where a definition breaks a working product — the allied-activity widening and the partnership exclusion will each catch real portfolios. For NBFC and MFI partners: expect data demands to harden before the final Directions land; a partner that cannot produce beneficiary-level data on demand is a classification liability, not a channel. For risk teams: run the existing on-lending book against the disbursement test now. Any loan counted at sanction that has not reached an end borrower is achievement that can be reversed, with a fund deposit priced off the Bank Rate as the consolation. Farmioc's DataStore, its agriculture data analytics platform serving the financial sector among other segments, is built for this layer of the book — district, crop and borrower signals in one view, so claims can be checked against what is actually growing, stored and disbursed. The targets did not move on 5 November. What a bank must prove did.