Priority Sector Lending (PSL) - On-lending by Small Finance Banks (SFBs) to NBFC-MFIs

Last updated: 06 May 2021

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The Reserve Bank of India has updated its guidelines regarding Priority Sector Lending (PSL) for Small Finance Banks (SFBs). SFBs can now include lending to registered NBFC-MFIs and other recognised MFIs in their PSL classification. This applies to fresh credit for on-lending to individuals, provided the MFI has a gross loan portfolio of up to ₹500 crore as of March 31, 2021. This facility is available until March 31, 2022.

Reserve Bank of India RBI/2021-22/27 FIDD.CO.Plan.BC.No.10/04.09.01/2021-22 May 5, 2021 The Chairman/ Managing Director Chief Executive Officer Small Finance Banks Dear Sir/Madam, Priority Sector Lending (PSL) - On-lending by Small Finance Banks (SFBs) to NBFC-MFIs As per extant

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FAQ :

Yes, under new guidelines, Small Finance Banks (SFBs) can lend to registered NBFC-MFIs and other recognised MFIs for on-lending purposes, and this lending will be reckoned for Priority Sector Lending (PSL) classification.

The MFIs must be registered NBFC-MFIs or other MFIs (Societies, Trusts etc.) that are members of an RBI recognised 'Self-Regulatory Organisation' and had a gross loan portfolio of up to ₹500 crore as on March 31, 2021.

Yes, the credit extended by SFBs to these MFIs will be permitted up to 10% of the bank's total priority sector portfolio as on March 31, 2021.

This dispensation is valid until March 31, 2022. However, loans disbursed under this facility will continue to be classified under Priority Sector until their repayment or maturity, whichever is earlier.

Yes, banks will be required to adhere to the conditions prescribed for on-lending under para 21 of the Master Directions on PSL dated September 4, 2020 (updated as on April 29, 2021).

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Notification No : RBI/2021-22/27 FIDD.CO.Plan.BC.No.10/04.09.01/2021-22
Published in Community & General
Source : https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12081&Mode=0

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