With a view to ease liquidity pressure in non-banking financial companies (NBFCs), the Reserve Bank of India (RBI) has allowed banks’ lending to NBFCs for on-lending to agriculture, micro and small enterprises, and housing to be classified as priority sector lending, up to specified limits. The RBI raised any bank’s exposure limit to a single NBFC from the existing 15 per cent to 20 per cent of tier-1 capital.
It said that Banks’ lending to NBFCs for on-lending to agriculture up to Rs 10 lakh a borrower will be treated as priority sector lending. So, too, for loans up to Rs 20 lakh for micro and small enterprises and housing. This has been done to increase the credit flow to certain sectors which contribute significantly to economic growth in terms of export and employment, and recognising the role played by NBFCs in providing credit to these.
Besides, in the Union Budget, the government aimed to encourage public sector banks to buy high-rated pooled assets of up to Rs 1 trillion of financially sound NBFCs. For which, it said, it would give a one-time and six-month partial credit guarantee for the first loss of up to 10 per cent.