RBI Announces Extension Of Priority Sector Banks Lending To NBFCs For On Lending
The RBI declared that the facility of Priority Sector Lending- Banks‘ lending to NBFCs for on-financing would be extended till September 30, 2021, and that bank lending to NBFCs (other than MFIs) for on-lending will be classified as PSL. The facility has been extended until March 31, 2022, as indicated in the ‘Statement on Developmental and Regulatory Policies’ dated October 8, 2021, in light of the improved traction witnessed in supplying credit to the underserved/unserved areas of the economy.
The provision was set to expire on September 30, and there was a need to prolong it in order to increase credit flow to specific key sectors of the economy that contribute significantly to growth and employment.
In August 2019, bank lending to registered NBFCs (other than MFIs) for on-lending to agriculture (investment credit), micro and small businesses (with an increased limit), and housing (with an increased limit) was allowed to be classified as priority sector lending up to certain limits, which were last extended on April 7, 2021 and were valid until September 30, 2021.
Loans disbursed under the on-lending model will remain in the Priority Sector until they are repaid or matured, whichever comes first. In addition, bank loans to HFCs for on-lending for housing purposes will continue as before.
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