Priority Sector Lending - Lending by banks to NBFCs for On-Lending

RBI/2019-20/179
FIDD.CO.Plan.BC.No.19/04.09.01/2019-20

March 23, 2020

The Chairman/ Managing Director
Chief Executive Officer
All Scheduled Commercial Banks
(Excluding Regional Rural Banks & Small Finance Banks)

Dear Sir/ Madam,

Priority Sector Lending - Lending by banks to NBFCs for On-Lending

Please refer to our Circular No. FIDD.CO.Plan.BC.07/04.09.01/2019-20 dated August 13, 2019 advising, inter alia, that the bank loans to registered NBFCs (other than MFIs) for on-lending will be eligible for classification as priority sector under respective categories up to March 31, 2020 and will be reviewed thereafter.

2. Accordingly, after undertaking a review, it has been decided to extend the priority sector classification for bank loans to NBFCs for on-lending for FY 2020-21. Further, existing loans disbursed under the on-lending model will continue to be classified under Priority Sector till the date of repayment/maturity.

3. Bank credit to registered NBFCs (other than MFIs) and HFCs for on-lending will be allowed up to an overall limit of five percent of individual bank’s total priority sector lending. Further, banks shall compute the eligible portfolio under on-lending mechanism by averaging across four quarters, to determine adherence to the prescribed cap.

Yours faithfully,

(Gautam Prasad Borah)
Chief General Manager-in-Charge