RBI further expands priority sector classification for bank lending to NBFCs

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In August 2019, the Reserve Bank of India (RBI) authorized banks to classify loans to registered non-bank financial corporations (NBFCs) as priority sector loans (PSLs). Now, the banking regulator has decided to extend it for another six months.

During the bi-monetary policy, RBI, Gov. Shaktikanta Das said this classification will be extended for six months until September 30, 2021. This is the regulator’s third extension. In August 2019, when it was announced, it was available until March 31, 2020. This exemption was then extended until March 31, 2021.

Up to 5 percent of a bank’s total PSL must be returned to agriculture, MSMEs and housing. “An amount of approximately Rs 37,000 crore has been loaned by banks to NBFCs for on-lending to specified priority sectors by December 2020,” RBI said. The regulator said this extension will ensure continued availability of credit to these sectors to accelerate economic recovery.

Meanwhile, over the course of politics, the Monetary Policy Committee (MPC) voted unanimously to keep the pension rate unchanged, RBI Governor Shaktikanta Das said. He said the regulator would maintain an accommodating position for as long as needed to mitigate the impact of the COVID-19 pandemic.

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