The Reserve Financial institution of India (RBI) on Friday determined to permit banks to lend to NBFCs for on-lending to precedence sectors on an on-going foundation to make sure continuation of the synergies which have been developed between banks and NBFCs in delivering credit score to the desired precedence sectors. The identical holds true for small finance banks who’re on-lending to NBFC-MFIs. This facility was earlier allowed until March 31, 2022.
Now, financial institution credit score to NBFCs, together with housing finance corporations (HFCs), for on-lending to precedence sectors might be allowed upto an total restrict of 5 per cent of a person banks complete precedence sector lending. Equally, small finance banks for on-lending to NBFC-MFIs and different MFIs, that are RBI recognised, might be allowed as much as an total restrict of 10 per cent of a person financial institution’s complete precedence sector lending.
“These limits shall be computed by averaging throughout 4 quarters of the monetary 12 months, to find out adherence to the prescribed cap,” the RBI stated.
Additional, the RBI stated, small finance banks might be allowed to lend to registered NBFC-MFIs and different MFIs who’ve a gross mortgage portfolio of upto Rs 500 crore as of March 31 of the earlier monetary 12 months. “In case the gross mortgage portfolio of the NBFC-MFIs/different MFIs exceeds the stipulated restrict at a later date, all precedence sector loans created previous to exceeding the gross mortgage portfolio restrict will proceed to be categorised by the small finance banks (SFBs) as precedence sector lending until compensation/maturity, whichever is earlier,” the RBI stated.