Page 53 - Banking Finance November 2020

RBI CIRCULAR

3. Exemption granted to HFCs from the provisions of has been decided that banks may ensure compliance
Chapter III B of Reserve Bank of India Act, 1934 except with the instructions contained in Para 4 of the circular
for section 45-IA (Requirement of registration & net ibid by December 15, 2020.
owned funds) was withdrawn on November 11, 2019.
4. All other instructions contained in our circular dated
On a review, it has been decided to additionally exempt August 6, 2020, remain unchanged.
HFCs from section 45-IB (Maintenance of percentage of
assets) and section 45-IC (Reserve fund) of the Reserve
(Prakash Baliarsingh)
Bank of India Act. Necessary Notification in this regard Chief General Manager
will be issued in due course. It is clarified that the
corresponding provisions of section 29B and 29C of the Co-Lending by Banks and NBFCs to
National Housing Bank Act, 1987 will, however, be
applicable to HFCs. Priority Sector
4. As mentioned in para 3 of the public document put out RBI/2020-21/63
for consultation, further harmonisation between the
November 05, 2020
regulations of HFCs and NBFCs will be taken up in a
phased manner in the next two years so as to ensure 1. Please refer to the circular FIDD.CO.Plan.BC.08/
that the transition is achieved with least disruption. 04.09.01/2018-19 dated September 21, 2018 on co-
Master Direction for HFCs covering all applicable origination of loans by banks and NBFCs for lending to
instructions will be issued shortly. priority sector. The arrangement entailed joint
contribution of credit at the facility level by both the
(Manoranjan Mishra) lenders as also sharing of risks and rewards.
Chief General Manager
2. Based on the feedback received from the stakeholders
and to better leverage the respective comparative
Opening of Current Accounts by Banks - advantages of the banks and NBFCs in a collaborative
effort, it has been decided to provide greater
Need for Discipline
operational flexibility to the lending institutions, while
RBI/2020-21/62 requiring them to conform to the regulatory guidelines
November 02, 2020 on outsourcing, KYC, etc. The primary focus of the
revised scheme, rechristened as “Co-Lending Model”
1. Please refer to our circular DOR.No.BP.BC/7/21.04.048/
(CLM), is to improve the flow of credit to the unserved
2020-21 dated August 6, 2020 on the captioned
and underserved sector of the economy and make
subject.
available funds to the ultimate beneficiary at an
2. In this connection, a reference is invited to Para 4 of affordable cost, considering the lower cost of funds
the circular referred to above, wherein the banks were from banks and greater reach of the NBFCs. Detailed
advised that in respect of existing current and CC/OD features of the CLM are furnished in the Annex.
accounts, banks shall ensure compliance with the above
3. In terms of the CLM, banks are permitted to co-lend
instructions within a period of three months from the
with all registered NBFCs (including HFCs) based on a
date of issue of the circular i.e. by November 5, 2020. prior agreement. The co-lending banks will take their
We have since received several references from banks
share of the individual loans on a back-to-back basis in
seeking clarifications on operational issues regarding
their books. However, NBFCs shall be required to retain
maintenance of current accounts already opened by
a minimum of 20 per cent share of the individual loans
the banks. These references are being examined by the on their books.
Reserve Bank and will be clarified separately by means
of a FAQ. 4. The banks and NBFCs shall formulate Board approved
policies for entering into the CLM and place the
3. Pending the issue of FAQ on these operational issues, it
approved policies on their websites. Based on their

BANKING FINANCE | NOVEMBER | 2020 | 53