Page 53 - Banking Finance June 2021

RBI CIRCULAR

RBI

CIRCULAR

Priority Sector Lending (PSL) - On-lending 3. The guidelines shall come into effect from the date of
the issuance of this circular.
by Small Finance Banks (SFBs) to NBFC-

MFIs (Sonali Sen Gupta)
Chief General Manager-in-Charge
RBI/2021-22/27
May 5, 2021
Utilisation of Floating Provisions/
1. As per extant guidelines, lending by Small Finance Banks Counter Cyclical Provisioning Buffer
(SFBs) to Micro-Finance Institutions (MFIs) for on-
lending is not reckoned for priority sector lending (PSL) RBI/2021-22/28
classification. In view of the fresh challenges brought May 5, 2021
on by the COVID-19 pandemic and to address the
emergent liquidity position of smaller MFIs, it has been 1. Please refer to our circular DBOD.No.BP.BC.89/
decided to allow PSL classification to the fresh credit 21.04.048/2005-06 dated June 22, 2006 and
extended by SFBs to registered NBFC-MFIs and other DBOD.No.BP.BC.68/21.04.048/2006-07 dated March 13,
MFIs (Societies, Trusts etc.) which are members of RBI 2007 on creation, accounting, disclosures and utilisation
recognised ‘Self-Regulatory Organisation’ of the sector of floating provisions by banks. Banks may also refer to
and which have a ‘gross loan portfolio’ of upto ?500 our circular DBOD.No.BP.BC.87/21.04.048/2010-11
crore as on 31 March 2021, for the purpose of on- dated April 21, 2011 on creation and utilisation of
lending to individuals. Bank credit as above will be ‘countercyclical provisioning buffer’, wherein we had
permitted up to 10% of the bank’s total priority sector advised that the buffer will be allowed to be used by
portfolio as on 31 March, 2021. banks for making specific provisions for non-performing
2. The above dispensation shall be valid upto March 31, assets, inter alia, during periods of system wide
2022. However, loans thus disbursed will continue to downturn, with the prior approval of RBI.
be classified under Priority Sector till the date of 2. Accordingly, in terms of our circulars DBOD.No.BP.95/
repayment/maturity whichever is earlier. Further, 21.04.048/2013-14 dated February 7, 2014 and
banks will be required to adhere to the conditions DBR.No.BP.BC.79/21.04.048/2014-15 dated March 30,
prescribed for on-lending under para 21 of our Master 2015, banks were allowed to utilise upto 33 per cent
Directions on PSL dated September 4, 2020 (updated and 50 per cent of floating provisions/ countercyclical
as on April 29, 2021). provisioning buffer held by them as on March 31, 2013

BANKING FINANCE | JUNE | 2021 | 53