RBI extends priority sector classification for bank loans to NBFCs

The Reserve Bank of India has extended the priority sector classification for bank loans to non-banking financial companies (NBFCs) for on-lending for FY21. 

The classification benefit was to be available till March 31.This is part of steps to provide support for financial sector entities to deal with slowdown and aftermath of COVID-19.Further, existing loans disbursed under the on-lending model will continue to be classified under priority sector till the date of repayment/maturity, RBI said in communication to banks.

The credit to NBFCs, other than micro-finance institutions and housing finance companies, for on-lending will be allowed up to an overall limit of five percent of bank’s total priority sector lending.Further, banks will compute the eligible portfolio under on-lending mechanism by averaging across four quarters, to determine adherence to the prescribed cap.

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