Extend on-lending of banks to NBFCs by one year as a priority sector: FIDC

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The Financial Industry Development Board has requested the Reserve Bank of India to extend the bank loan exemption to registered NBFCs (other than MFIs) for on-lending to be eligible for classification as a sector another year’s priority.

The waiver expired at the end of March this year.

“The renewal of the waiver will provide a much-desired credit boost to the needy borrower segment, as NBFCs are the final link in extending credit to small and medium-sized businesses for financing equipment, l for business expansion, working capital and similar business purposes,” FIDC said in a letter to RBI Governor Shaktikanta Das.

The IFCD is a representative body of the asset finance and lending NBFCs.

“We urge RBI to consider extending the above exemption from bank lending to NBFCs to on-lend to the agriculture and MSME sectors, to count as part of priority sector lending, as hitherto, for a new period until March 2023″, says the FIDC.

He noted that the end borrowers of NBFCs continue to be those who face difficulties in accessing formal credit and for whom NBFCs have designed credible means of service. Additionally, the extension of the waiver will allow access to credit at cheaper rates for underbanked borrowers.

Micro and small businesses and housing (with an increased limit) were allowed to be classified as priority sector loans up to certain limits in August 2019 by the RBI. This was later extended in April 2021 and was valid until September 30, 2021. Then in October 2021, the RBI further extended the facility until March 31, 2022. It had attributed the decision to increased traction in extending credit to underserved people and unserved segments of the economy,

Published on

April 26, 2022

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