Lending by banks to NBFCs for On-Lending to be classified as Priority Sector Lending

Lending by banks to NBFCs for On-Lending to be classified as Priority Sector Lending

• Before understanding this news, lets understand what is on-lending. On-lending means When an organization lends money that they have borrowed from another organization or person. Example, when NBFC borrows money from bank to lend that money to customers, it is known as on-lending.

• As per instructions from RBI, the bank credit to registered NBFCs (other than MFIs) for on-lending will be eligible for classification as priority sector under following category:
  • Agriculture: Limit- up to Rs. 10 lakh per borrower.
  • Micro & Small enterprises: Limit- up to Rs. 20 lakh per borrower.
  • Housing: limit- upto Rs. 20 lakh per borrower. (increased from Rs 10 lakh)

• 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.

Points to remember:

1. What is on-lending?
2. Limit for PSL by NBFC in Agriculture?
3. Limit for PSL by NBFC in MSE
4. Limit for PSL by NBFC in Hosuing?
5. Bank credit to NBFCs for On-Lending will be allowed upto a limit of?- 5%