Business News Update : Banks allowed priority sector lending to NBFCs for another 6 months

Insight Online News

Mumbai, April 7 : With a view to ensure continued availability of credit to agriculture, MSME and housing sectors and aid faster economic recovery, the RBI has extended the priority sector lending (PSL) classification for lending by banks to NBFCs for ‘on-lending’ to the identified sectors for six months up to September 30, 2021.

Recognising the role played by NBFCs in providing credit at the bottom of the pyramid it was decided in August 2019 to allow banks to classify lending to registered NBFCs (other than MFIs) as PSL up to 5 per cent of a bank’s total PSL, for on-lending to Agriculture/MSME/Housing till March 31, 2020. This dispensation was later extended up to March 31, 2021.

An amount of around Rs 37,000 crore has been lent by banks to NBFCs for on-lending to the specified priority sectors by December 2020.

The extension will further facilitate NBFCs to support the sectors which contribute significantly to the economic growth in terms of export and employment. It will also improve the liquidity position of such entities.


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