Reserve Bank of India (RBI) on Friday permitted banks, together with small finance banks, to proceed offering credit score facility to NBFCs for the aim of on-lending to sure precedence sectors.
The facility of lending by business banks to NBFCs and lending by Small Finance Banks (SFBs) to NBFC-MFIs, for the aim of on-lending to sure precedence sectors, was accessible until March 31, 2022.
“To ensure continuation of the synergies that have been developed between banks and NBFCs in delivering credit to the specified priority sectors, it has been decided to allow the… facility on an on-going basis,” RBI mentioned in a round.
Bank credit score to NBFCs, together with HFCs, for on-lending will probably be allowed as much as an general restrict of 5 per cent of a person financial institution’s complete precedence sector lending within the case of business banks.
In the case of SFBs, credit score to NBFC-MFIs (Non-Banking Financial Company – Micro Finance Institutions) and different MFIs (Societies, Trusts, and so on) that are members of RBI recognised ‘Self-Regulatory Organisation’ of the sector, will probably be allowed as much as an general restrict of 10 per cent of a person financial institution’s complete precedence sector lending.
These limits will probably be computed by averaging throughout 4 quarters of the monetary 12 months, to find out adherence to the prescribed cap, the round mentioned.
According to the round, SFBs are allowed to lend to registered NBFC-MFIs and different MFIs which have a Gross Loan Portfolio (GLP) of as much as Rs 500 crore as on March 31 of the earlier monetary 12 months, for the aim of on-lending to precedence sectors.
Source: www.financialexpress.com”