RBI Extends Priority Sector Classification For Bank Loans To NBFCs To FY21
Money & Banking
The Reserve Bank of India (RBI) has decided to extend priority sector classification for bank loans to non-banking finance companies (NBFCs) for on-lending for FY 2020-21.
As per the August 2019 circular, bank credit to registered NBFCs (other than microfinance institutions) for on-lending was eligible for classification as priority sector up to March 31, 2020.
A bank can classify fresh loans sanctioned by NBFCs to the priority sector -- agriculture, micro & small enterprises (MSEs) and housing -- out of bank borrowings.
In its latest circular, the RBI also said that existing loans disbursed under the on-lending model will continue to be classified under the Priority Sector till the date of repayment/maturity.
Bank credit to registered NBFCs (other than MFIs) for on-lending is classified as priority sector under respective categories subject to conditions -- on-lending by NBFCs for the ‘term lending’ component under agriculture is allowed up to ₹10 lakh per borrower; on-lending to micro & small enterprises is allowed up to ₹20 lakh per borrower; and on-lending by housing finance companies (HFCs) for housing is allowed up to ₹20 lakh per borrower.
The RBI said Bank credit to registered NBFCs (other than MFIs) and HFCs for on-lending will be allowed up to an overall limit of 5 per cent of the individual bank’s total priority sector lending.
Published on
March 23, 2020
The Reserve Bank of India (RBI) has decided to extend priority sector classification for bank loans to non-banking finance companies (NBFCs) for on-lending for FY 2020-21.
As per the August 2019 circular, bank credit to registered NBFCs (other than microfinance institutions) for on-lending was eligible for classification as priority sector up to March 31, 2020.
A bank can classify fresh loans sanctioned by NBFCs to the priority sector -- agriculture, micro & small enterprises (MSEs) and housing -- out of bank borrowings.
In its latest circular, the RBI also said that existing loans disbursed under the on-lending model will continue to be classified under the Priority Sector till the date of repayment/maturity.
Bank credit to registered NBFCs (other than MFIs) for on-lending is classified as priority sector under respective categories subject to conditions -- on-lending by NBFCs for the ‘term lending’ component under agriculture is allowed up to ₹10 lakh per borrower; on-lending to micro & small enterprises is allowed up to ₹20 lakh per borrower; and on-lending by housing finance companies (HFCs) for housing is allowed up to ₹20 lakh per borrower.
The RBI said Bank credit to registered NBFCs (other than MFIs) and HFCs for on-lending will be allowed up to an overall limit of 5 per cent of the individual bank’s total priority sector lending.
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