RBI allows lending by commercial banks to NBFCs and SFBs to NBFC-MFIs

Circular No. RBI/2022-23/50 FIDD.CO.Plan.BC.No.5/04.09.01/2022-23, Dated: 13.05.2022

The RBI has decided to allow the Lending by Commercial Banks to NBFCs and Small Finance Banks (SFBs) to NBFC-MFIs, for on-lending to certain priority sectors on an ongoing basis up to March 31, 2022. Further, SFBs are allowed to lend to registered NBFC-MFIs and other MFIs which have a ‘gross loan portfolio’ (GLP) of up to Rs 500 crore as on March 31 of the previous financial year, for the purpose of on-lending to the priority sector.

Bank credit to NBFCs (including HFCs) for on-lending will be allowed up to an overall limit of 5% of an individual bank’s total priority sector lending in case of commercial banks. In case of SFBs, credit to NBFC-MFIs and other MFIs (Societies, Trusts, etc.) which are members of RBI recognized ‘Self-Regulatory Organisation’ of the sector, will be allowed up to an overall limit of 10% of an individual bank’s total priority sector lending.

Further, in case the GLP of the NBFC-MFIs/other MFIs exceeds the stipulated limit at a later date, all priority sector loans created prior to exceeding the GLP limit will continue to be classified by the SFBs as PSL till repayment/maturity, whichever is earlier.

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