Commercial bank credit to NBFCs for on-lending to

Solution

Lending by commercial banks to NBFCs and lending by Small Finance Banks (SFBs) to NBFC-MFIs, for the purpose of on-lending to certain priority sectors, was permitted up to March 31, 2022. To ensure continuation of the synergies that have been developed between banks and NBFCs in delivering credit to the specified priority sectors, RBI, in May 2022, has allowed the above facility on an on-going basis.

• Bank credit to NBFCs (including HFCs) for On-Lending will be allowed up to a limit of five percent of individual bank’s total PSL .
• 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 percen t of an individual bank’s total priority sector lending.