The Reserve Bank of India (RBI) has said that the deficiencies in compliance to the classification of priority sector lending (PSL) of certain agriculture loans by the top three private sector banks are limited to them and are not a system-wide concern.

“…it is not at a system level. These are issues which keep getting flagged in bank-to-bank individual cases at a system level. There is no cause for concern,” said RBI Governor Sanjay Malhotra in the post-policy conference on Friday. 

The RBI had directed HDFC Bank and ICICI Bank, country’s largest and second largest private sector lenders, to make additional standard asset provisions in the December quarter of FY26, due to the mis-classification of some of their agricultural loans as PSL credit.

The RBI then strengthened the PSL compliance norms mandating external auditor certificates from intermediaries to prevent double-claiming of loans. 

HDFC Bank had to set aside Rs 500 crore in Q3 while ICICI Bank took a hit of Rs 1,283 crore on its agriculture priority sector loan portfolio. 

Axis Bank, the country’s third-largest private sector lender, had to make similar provisions of Rs 1,231 crore in the June quarter of FY26, for two agri-loan products it had been offering since 2015 and 2021 and had discontinued.

Banks are required by RBI regulation to set aside 40% of their total credit for sectors such as agriculture, small businesses, education and renewable energy, among others.

RBI deputy governor Swaminathan J. pointed out that the RBI had found certain deviations in the PSL classification of certain banks, but not on a system-wide basis. “These are some outlier classifications that we call out and the banks accordingly do a reclassification. So, you can be assured that there is no system-level issue,” he said.

Separately, the RBI today said it has comprehensively reviewed the Kisan Credit Card (KCC) scheme with a view to expanding coverage, streamlining operational aspects and addressing emerging requirements. 

The central bank will issue a revised set of instructions to banks on the KCC scheme, consolidating those on agriculture and allied activities. 

 “The proposed guidelines include, among others, standardisation of crop season, extension of KCC tenure to six years, alignment of drawing limit with scale of finance (SoF) for each crop season and inclusion of expenses on technological interventions,” the RBI said. 

Banks provide KCC loans to farmers, which are subsidised and used for agricultural, animal husbandry and fishery needs.

Swaminathan said that the review of KCC loans is part of the central bank’s periodic review of all guidelines. “It is almost five years now. So, this is a periodical review that we have undertaken and we are also modifying certain contours as regards the crop season, the time allowed per season and also the overall validity period of the KCC,” he said.