## Policy Summary: RBI/2022-23/50 FIDD.CO.Plan.BC.No.5/04.09.01/2022-23
**Date:** May 13, 2022
**Subject:** Lending by Commercial Banks to NBFCs and Small Finance Banks (SFBs) to NBFC-MFIs for On-lending to Priority Sectors
**Issuing Authority:** Reserve Bank of India (RBI), Financial Inclusion and Development Department
**Addressees:** All Scheduled Commercial Banks (excluding Regional Rural Banks, Urban Cooperative Banks, and Local Area Banks), Small Finance Banks (SFBs).
**Purpose:** To ensure the continued flow of credit to priority sectors by allowing commercial banks and SFBs to lend to Non-Banking Financial Companies (NBFCs) and Microfinance Institutions (MFIs) for on-lending. This policy supersedes previous notifications FIDD.CO.Plan. BC.No.15/04.09.01/2021-22 dated October 8, 2021, and FIDD.CO.Plan.BC.No.10/04.09.01/2021-22 dated May 5, 2021, which permitted this facility up to March 31, 2022.
**Key Provisions:**
* **Ongoing Facility:** The facility allowing banks to lend to NBFCs and SFBs to NBFCMFIs for on-lending to priority sectors is now permitted on an ongoing basis.
* **Commercial Banks:** Bank credit to NBFCs (including Housing Finance Companies - HFCs) for on-lending is allowed up to 5% of an individual bank's total priority sector lending (PSL).
* **Small Finance Banks (SFBs):** Credit to NBFC-MFIs and other MFIs (Societies, Trusts, etc.) that are members of an RBI-recognized Self-Regulatory Organization (SRO) is allowed up to 10% of an individual bank's total PSL.
* **Limit Calculation:** Adherence to the prescribed caps (5% and 10%) will be determined by averaging across the four quarters of the financial year.
* **SFB Eligibility Criteria for NBFCMFI Lending:** SFBs can lend to registered NBFC-MFIs and other MFIs with a gross loan portfolio (GLP) of up to ₹500 crore as of March 31st of the previous financial year, for on-lending to the priority sector.
* **GLP Limit Exceedance:** If the GLP of the NBFCMFI/other MFI exceeds ₹500 crore at a later date, all priority sector loans created before exceeding the GLP limit will continue to be classified by the SFBs as PSL until repayment/maturity, whichever is earlier.
**Contact Information:**
Sonali Sen Gupta
Chief General Manager-in-Charge
Financial Inclusion and Development Department, Central Office
10th Floor, Central Office Building
Shahid Bhagat Singh Marg, Mumbai – 400 001
Tel No.: 91-22-22601000; 91-22-22621011/22610948/22610943
Email: cgmincfidd@rbi.org.in
Key Entities Referenced
Reserve Bank of India: The central bank of India, which issued this notification.
Scheduled Commercial Banks: Banks that are listed in the Second Schedule to the Reserve Bank of India Act, 1934.
Small Finance Banks: A type of bank in India that focuses on providing financial services to underserved populations.
Regional Rural Banks: Indian Banks operating at regional level in different States of India.
Urban Cooperative Banks: Primary cooperative banks located in urban and semi-urban areas.
Local Area Banks: Private sector banks which operate in a limited area.
NBFCs: Non-Banking Financial Companies
Priority Sector Lending: A scheme by Reserve Bank of India, where banks are required to lend a certain portion of their funds to specified sectors, such as agriculture, small businesses, and education.
भारतीय �रज़व� ब�क
RESERVE BANK OF INDIA
RBI/2022-23/50
FIDD.CO.Plan.BC.No.5/04.09.01/2022-23 May 13, 2022
The Chairman/ Managing Director/
Chief Executive Officer
All Scheduled Commercial Banks (Including Small Finance Banks)
(Excluding Regional Rural Banks, Urban Co-operative Banks and Local Area Banks)
Dear Sir/Madam,
Lending by Commercial Banks to NBFCs and Small Finance Banks (SFBs) to NBFC-MFIs, for
the purpose of on-lending to priority sectors
Please refer to para nos. 21.2, 21.3, 22 and 24 of the Master Directions on Priority Sector Lending dated
September 4, 2020 (updated from time to time), along with notifications FIDD.CO.Plan.
BC.No.15/04.09.01/2021-22 dated October 8, 2021 and FIDD.CO.Plan.BC.No.10/04.09.01/2021-22
dated May 5, 2021 wherein 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.
2. To ensure continuation of the synergies that have been developed between banks and NBFCs in
delivering credit to the specified priority sectors, it has been decided to allow the above facility on an
on-going basis.
3. Bank credit to NBFCs (including HFCs) for on-lending will be allowed up to an overall limit of 5 percent
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 percent of an individual
bank’s total priority sector lending. These limits shall be computed by averaging across four quarters of
the financial year, to determine adherence to the prescribed cap.
4. SFBs are allowed to lend to registered NBFC-MFIs and other MFIs which have a ‘gross loan portfolio’
(GLP) of up to ₹500 crore as on March 31 of the previous financial year, for the purpose of on-lending
to priority sector. 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.
Yours faithfully,
(Sonali Sen Gupta)
Chief General Manager-in-Charge
िव�ीय समावेशन और िवकास िवभाग,क��ीय कायार्लय, 10व� मंिज़ल,क��ीय कायार्लय िब�ल्डगं ,शहीद भगत �संह माग,र् मुंबई 400 001
टेलीफोन:Tel No.: +912222601000/ फैक्स: +91-22-22621011/22610948/22610943 ईमेल: cgmincfidd@rbi.org.in
Financial Inclusion and Development Department, Central Office,10th Flr, Central Office Building, Shahid Bhagat Singh Marg,Mumbai 400001
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