Money & Banking

RBI ups cap on bank credit to NBFCs

Our Bureau Mumbai | Updated on August 13, 2019 Published on August 13, 2019

File photo   -  AP

In a bid to boost credit to the needy segment of borrowers, the RBI on Tuesday said bank credit to non-banking financial companies (NBFCs) for on-lending to the agriculture, micro and small enterprises (MSE) and housing categories under priority sector lending (PSL) will be allowed up to a limit of 5 per cent of the individual bank’s total PSL on an ongoing basis. The move is expected to encourage banks to lend to NBFCs, especially housing finance companies (HFCs), which are currently facing a liquidity crunch.

The RBI said its latest instructions will be valid for the current financial year, after which they will be reviewed.

However, loans disbursed under the on-lending model will continue to be classified as PSL till the date of repayment/maturity.

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

Bank credit to registered NBFCs (other than MFIs) for on-lending will be eligible for classification as priority sector under the respective categories, subject to conditions. For the ‘term lending’ component of ‘Agriculture’ the limit is ₹10 lakh per borrower. For MSE borrowers, it is ₹20 lakh. The limit for on-lending by HFCs has been doubled to ₹20 lakh per borrower.

Published on August 13, 2019

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.