RBI extends priority sector classification for bank loans to NBFCs for on-lending for FY21

Earlier, the priority sector lending classification for on-lending to NBFCs was available till March 31, 2020.
The RBI also said that the existing loans disbursed under the on-lending model will continue to be classified under Priority Sector till the date of repayment or maturity.

he Reserve Bank of India (RBI) on Monday decided to extend the priority sector classification for bank loans to Non-Banking Financial Company (NBFC) for on-lending for FY 2020-21.

Earlier, the priority sector lending classification for on-lending to NBFCs was available till March 31, 2020.

In a notification, the central bank also said that the existing loans disbursed under the on-lending model will continue to be classified under Priority Sector till the date of repayment or maturity.

Further, the bank credit to registered NBFCs (other than Micro Finance Institutions) and Housing Finance Companies (HFC) for on-lending will be allowed up to an overall limit of 5 percent of individual bank’s total priority sector lending.

The RBI also said that the banks shall compute the eligible portfolio under on-lending mechanism by averaging across four quarters, to determine adherence to the prescribed cap.

Priority sector lending intends to provide institutional credit to those sectors and segments which find it difficult to get credit. Such sectors include agriculture, Micro, Small and Medium Enterprises (MSME), export credit, Education, housing, social infrastructure, renewable energy and others, according to the RBI.

Source: cnbctv18