RBI proposes ₹100 crore cap on agri infrastructure loans under priority sector rules

The Reserve Bank of India has proposed that loans for agricultural infrastructure carry an aggregate sanctioned limit of ₹100 crore per borrower from the banking system, as part of a draft rewrite of its Priority Sector Lending (PSL) guidelines released on Thursday.

The draft is part of the central bank's broader effort to consolidate its scattered instructions into single sets of directions for each type of regulated entity. Alongside the commercial bank draft, the RBI has issued separate versions for small finance banks, local area banks and regional rural banks.

For commercial banks, the draft sets an aggregate limit of ₹4 crore per borrowing entity on crop loans, medium and long-term loans for agriculture and allied activities, and loans for pre- and post-harvest work. Farm lending is defined to include farm credit, agricultural infrastructure and ancillary activities, so the new ₹100 crore ceiling sits within that wider bucket.

The draft also spells out limits in other priority areas. Education loans to individuals, including vocational courses, would qualify up to ₹25 lakh. For renewable energy, bank loans of up to ₹35 crore to power generators and public utilities such as street lighting and remote village electrification would be eligible, while the limit for individual households is ₹10 lakh per borrower.

Why it matters: priority sector classification steers a meaningful share of bank credit towards areas the government wants to nurture. Agriculture, MSMEs, exports, education, housing, social infrastructure and renewable energy all fall under that umbrella. Clear per-borrower ceilings give lenders, agri-infrastructure developers and project financiers a firmer sense of how large exposures will be treated, which could help storage, processing and supply-chain projects plan their funding.

Nothing is final yet. The RBI has invited comments and feedback on the drafts until November 26, after which it can revise the text before issuing the final directions. Banks and industry bodies are likely to use the window to weigh in on the thresholds.

Source reporting: Business Standard.

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