What changed
The deadline for classifying bank loans to registered NBFCs (excluding MFIs) for on-lending as priority sector under Agriculture and Micro & Small Enterprises was extended from March 31, 2021 to September 30, 2021. This extension was announced in the April 7, 2021 Statement on Developmental and Regulatory Policies to support continued credit flow and economic recovery.
What it means for you
Banks can continue to lend to NBFCs for on-lending to agriculture and MSE sectors and classify those loans as priority sector until end-September 2021. This provides a six-month window to maintain PSL compliance without disruption. Existing loans already disbursed under this model retain PSL status until their repayment or maturity, ensuring no sudden reclassification.
What you must do
- Update internal PSL tracking systems to reflect the extended deadline of September 30, 2021 for new on-lending loans to NBFCs.
- Ensure that loans to HFCs for housing on-lending continue to be classified as PSL on an ongoing basis as per existing guidelines.
- Review existing on-lending loan portfolios to confirm that loans disbursed before the extension remain classified as PSL until maturity.
- Communicate the extension to relevant credit and compliance teams to align lending strategies with the revised timeline.
Who it affects
All Scheduled Commercial Banks (excluding RRBs, SFBs, UCBs, LABs), NBFCs (excluding MFIs) engaged in on-lending to agriculture and MSE sectors, HFCs receiving bank loans for housing on-lending
Does this extension apply to loans to NBFC-MFIs?
No, the circular specifically excludes MFIs. Only loans to registered NBFCs other than MFIs are covered under this extension for on-lending to agriculture and MSE.
What happens to existing on-lending loans after September 30, 2021?
Existing loans disbursed under the on-lending model will continue to be classified as Priority Sector until their date of repayment or maturity, even after the September 30 deadline.
Are bank loans to HFCs for housing on-lending affected by this extension?
No, loans to HFCs for housing on-lending continue to be eligible for PSL classification on an ongoing basis as per the Master Direction on PSL dated September 4, 2020, and are not subject to this temporary extension.