RBI tweaks norms for priority sector lending

Mumbai: 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.

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.