RBI releases guidelines for lending by banks to NBFCs for On-Lending

New Delhi: The Reserve Bank of India laid out detailed guidelines stating that bank credit to registered NBFCs (other than MFIs) for on-lending will be eligible for classification as priority sector.

The classification under respective categories will be subject to the following conditions:

Agriculture: On-lending by NBFCs for ‘Term lending’ component under Agriculture will be allowed up to Rs 10 lakh per borrower.

Micro & Small enterprises: On-lending by NBFC will be allowed up to Rs 20 lakh per borrower.

Housing: Enhancement of the existing limits for on-lending by HFCs on Priority Sector lending, from Rs 10 lakh per borrower to Rs 20 lakh per borrower.

Under the above on-lending model, banks can classify only the fresh loans sanctioned by NBFCs out of bank borrowings, on or after the date of issue of this circular. However, loans given by HFCs under the existing on-lending guidelines will continue to be classified under priority sector by banks, RBI said.

Bank credit to NBFCs for On-Lending will be allowed upto a limit of five percent of individual bank’s total priority sector lending on an ongoing basis. Further, the above instructions will be valid for the current financial year upto March 31, 2020 and will be reviewed thereafter.

However, loans disbursed under the on-lending model will continue to be classified under Priority Sector till the date of repayment/maturity, RBI added.