Executive Summary
RBI issued the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Second Amendment Directions, 2026 on 7 August 2026 (RBI/2026-27/232), modifying specified provisions of the PSL Master Directions.
Background
RBI's PSL framework prescribes lending targets and classification norms for banks. The Master Directions have been updated to reflect provisions deleted or modified by the Second Amendment Directions.
What Has Changed?
Specified provisions governing PSL classification and eligibility have been amended; the updated Master Directions record the changes with effect from 7 August 2026.
Key Provisions
The amendment affects PSL classification, eligibility of specified activities for PSL treatment, and related reporting requirements. The precise treatment should be confirmed against the amended clause applicable to the specific lending category.
Who Are Affected
Commercial Banks, Regional Rural Banks, Small Finance Banks, Local Area Banks, and Primary (Urban) Co-operative Banks (other than Salary Earners' Banks) covered by the PSL Directions.
Practical Implication
Banks must ensure PSL-classified lending continues to meet the amended eligibility and classification conditions; misclassification affects PSL reporting and target-achievement computation.
What Businesses Should Do
- Review the amended PSL provisions.
- Update internal PSL classification checklists and systems.
- Reassess affected loan accounts and supporting documentation.
- Align regulatory reporting with the updated Master Directions.
KGS Perspective
PSL classification should rest on documented eligibility checks. Audit teams should verify that advances reported under PSL meet the amended conditions and that the bank's compliance process has incorporated the August 2026 changes.
Conclusion
The amendment updates the PSL regulatory framework with direct implications for classification and reporting; affected banks should verify alignment of internal systems with the updated Master Directions.
Source / Regulatory Reference
- RBI – PSL Second Amendment Directions, 2026: https://rbi.org.in/scripts/FS_Notification.aspx?fn=2759
- RBI – Updated PSL Master Directions: https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12799
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