RBI tweaks norms for priority sector lending

By: |
Published: August 13, 2019 10:20:31 PM

As per the revised norms, on-lending by NBFCs for 'term lending' component under agriculture will be allowed up to Rs 10 lakh per borrower.

RBI, priority sector lending, NBFC, MFI, MSE limit, priority sector norms, MSMEThe Reserve Bank said it is being done in order to boost credit to the needy segment of borrowers.

The RBI on Tuesday said on-lending by registered NBFCs (other than MFIs) towards agriculture, MSEs and housing sector up to prescribed limits will be treated as priority sector loans. The Reserve Bank said it is being done in order to boost credit to the needy segment of borrowers.

As per the revised norms, on-lending by NBFCs for ‘term lending’ component under agriculture will be allowed up to Rs 10 lakh per borrower. In case of micro and small enterprises (MSEs) the limit will be Rs 20 lakh per borrower. In housing sector, the limit has been enhanced from Rs 10 lakh to Rs 20 lakh per borrower for classification of the loan as priority sector lending.

Also read: Even as growth dips, this emerging market veteran still bets on India; these 3 steps may revive economy

Under the revised on-lending model, banks can classify only the fresh loans sanctioned by NBFCs out of bank borrowing. However, loans given by housing finance companies under the existing on-lending guidelines will continue to be classified under priority sector by banks.

The Reserve Bank of India circular also clarified that bank credit to NBFCs for on-lending will be allowed up to a limit of five per cent of individual bank’s total priority sector lending on an ongoing basis. Further, these norms will be reviewed after March 31, 2020, the RBI said. Under the priority sector norms, banks are mandated to lend a particular portion of their funds to specified sectors, like agriculture, education, export, MSME and social infrastructure.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Next Stories
1ADB signs pact to invest $23 million in NCD of GRIL
2India, Russia to boost ties to achieve $30 billion bilateral trade by 2025
3Indians becoming billionaires at fastest pace in the world, but there is a catch