The Reserve Bank of India (RBI) has issued the Priority Sector Lending (Targets and Classification) (Amendment) Directions, 2026, introducing a new provision allowing banks to classify loans extended to the National Cooperative Development Corporation (NCDC) for on-lending to cooperative societies as priority sector advances.
Under the newly inserted Paragraph 24A, bank credit provided to NCDC for on-lending to cooperative societies, for purposes and activities specified under the Master Directions on Priority Sector Lending, shall be eligible for classification under the respective priority sector categories.
The RBI has stipulated that such classification will be subject to NCDC furnishing quarterly utilisation certificates to the lending banks. These certificates must be issued by a CAG-empanelled chartered accountant firm and must confirm that the bank credit has been utilised for extending loans to cooperative societies for priority sector-eligible purposes and that the on-lending benefit has not been claimed from any other bank.
The central bank has also clarified the scope of applicability of the new provision. The benefit under Paragraph 24A will apply only to loans sanctioned by banks to NCDC on or after January 19, 2026.
Importantly, the RBI has specified that the new provision shall not apply to Regional Rural Banks, Urban Cooperative Banks, Small Finance Banks and Local Area Banks. As a result, the priority sector lending framework applicable to cooperative banks remains unchanged under the existing Master Directions.
The amendment thus enables eligible banks to route priority sector lending to the cooperative sector through NCDC, while maintaining a distinct and unaltered regulatory framework for cooperative banks under the priority sector lending regime.
