Jun 30, 2021

RBI Extends Priority Sector Lending Classification for Lending by Banks to NBFCs for On-lending

Loans given by certain scheduled commercial banks to registered NBFCs (other than Micro Finance Institutions) for on-lending were eligible for classification as ‘priority sector’ under the sub-categories of Agriculture and Micro & Small Enterprises until March 31, 2021, and the RBI was to review this position thereafter. With a view to aid faster economic recovery by ensuring continued availability of credit to the Agriculture and Micro & Small Enterprises sectors, the RBI, by its Circular dated April 7, 2021, extended this classification by six months i.e. up to September 30, 2021. However, loans given by certain scheduled commercial banks to Housing Finance Companies for on-lending for the purpose of purchase/construction/reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to an aggregate loan limit of ₹ 20 lakh (approx. US$ 27,000) per borrower, will continue on an on-going basis and existing loans disbursed under the on-lending model will continue to be classified under Priority Sector till the date of repayment/maturity. All other guidelines issued under previous circulars issued by the RBI will continue to apply.

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