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07/08/2019 12:57pm

RBI allows banks to lend through NBFCs to priority sectors including MSEs, subject to certain conditions

image RBI allows banks to lend through NBFCs to priority sectors including MSEs, subject to certain conditions

Mumbai, Aug 7 (KNN) Relaxing the bank lending norms to non-banking financial companies (NBFCs), the Reserve Bank of India (RBI) today allowed the banks on lending through NBFCs to Agri, MSMEs and affordable housing to treated as priority sector lending for banks.

Now the banks have been allowed on-lending to agriculture up to Rs 10 lakhs and micro and small enterprises up to Rs 20 lakh and housing up to Rs 20 lakh per borrower to be classified as priority sector lending.

“With a view to further increasing the credit flow to certain priority sectors which contribute significantly to the economic growth in terms of export and employment, and recognizing the role played by NBFCs in providing credit to these sectors, it has been decided to allow, subject to certain conditions, bank lending to registered NBFCs (other than MFIs) for on-lending to Agriculture (investment credit) up to Rs 10.0 lakhs; Micro and Small Enterprises up to Rs 20.0 lakh and housing up to Rs 20.0 lakh per borrower (up from Rs10.0 lakh at present) to be classified as priority sector lending,” RBI said.

Detailed guidelines on the above measures will be issued by the end of August 2019.

The RBI also eased bank’s exposure limits to help the NBFC sector under stress. The central bank has raised bank’s exposure limit to a single NBFC to 20% of the Tier-I capital of the bank against the current 15%.

“Under the revised guidelines on large exposure framework that came into effect from April 1, 2019, a bank’s exposure to a single NBFC is restricted to 15 per cent of its Tier I capital, while for entities in the other sectors the exposure limit is, 20 percent of Tier I capital of the bank, which can be extended to 25 per cent by banks’ Boards under exceptional circumstances,” RBI said.

“As a step towards harmonization of the counterparty exposure limit to single NBFC with that of the general limit, it has been decided to raise a bank’s exposure limit to a single NBFC to 20% of Tier-I capital of the bank,” RBI added. (KNN Bureau)

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