PSL On-Lending to NBFCs Extended Till Sep 30, 2021
Current · Source: Reserve Bank of India · RBI/2021-22/15 · issued 07 Apr 2021 · ~2 min read
Quick answerRBI extends PSL classification for bank loans to NBFCs for on-lending to agriculture and MSE by six months, up to September 30, 2021. Existing loans remain PSL till maturity. HFC on-lending for housing continues on ongoing basis.
The rule, in the simplest words
Banks can lend to NBFCs for on-lending to agriculture and MSE sectors until September 30, 2021.
Existing loans to NBFCs for on-lending remain classified as priority sector until maturity.
HFC on-lending for housing continues on an ongoing basis without a deadline.
How it plays out — a real example
Mr. Kumar's bank extends the deadline for classifying loans to NBFCs for on-lending, giving him a six-month window to maintain PSL compliance. He reviews existing loan portfolios to confirm that loans disbursed before the extension remain classified as PSL until maturity. An agri & priority-sector lending officer in Indore, Mr. Kumar, continues to lend to NBFCs for on-lending to agriculture and MSE sectors without worrying about the deadline. He ensures that existing loans remain classified as priority sector until maturity, allowing him to maintain PSL compliance without disruption.
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
❓ Common questions
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.
📜 Read the original circular — full text as issued by RBI
RBI/2021-22/15
FIDD.CO.Plan.BC.No.8/04.09.01/2021-22
April 7, 2021
The Chairman/ Managing Director
Chief Executive Officer
All Scheduled Commercial Banks
(Excluding Regional Rural Banks, Small Finance Banks, Urban Co-operative Banks and Local Area Banks)
Dear Sir/Madam
Priority Sector Lending (PSL) - Lending by banks to NBFCs for On-Lending
Please refer to our Circular No. RBI/2019-20/179 FIDD.CO.Plan.BC.No.19/04.09.01/2019-20 dated March 23, 2020 advising, inter alia, that the bank loans to registered NBFCs (other than MFIs) for on-lending will be eligible for classification as priority sector under Agriculture and Micro & Small Enterprises up to March 31, 2021 and will be reviewed thereafter.
2. As announced in the Statement on Developmental and Regulatory Policies dated April 7, 2021 , with a view to ensure continued availability of credit to these sectors to aid faster economic recovery, it has been decided to extend the PSL classification for lending by banks to NBFCs for on-lending by six months i.e. up to September 30, 2021. However, bank loans to HFCs for on-lending for the purpose of housing, as prescribed in para 23 of our Master Direction on PSL dated September 4, 2020, will continue on an on-going basis. Further, existing loans disbursed under the on-lending model will continue to be classified under Priority Sector till the date of repayment/maturity.
3. All other guidelines as issued vide circulars FIDD.CO.Plan.BC.7/04.09.01/2019-20 dated August 13, 2019 , FIDD.CO.Plan.BC.No.19/04.09.01/2019-20 dated March 23, 2020 and Master Directions on PSL dated September 4, 2020 will continue to apply.
Yours faithfully
(Sonali Sen Gupta)
Chief General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2021-22/15 · issued 07 Apr 2021. The plain-English explanation above is BankPulse’s own independent summary.
Update internal PSL tracking systems to reflect the extended deadline of September 30, 2021 for new on-lending loans to NBFCs.
📜 Compliance
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.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are an IT/Systems lead at a bank this circular applies to (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), your first concrete step on “PSL On-Lending to NBFCs Extended Till Sep 30, 2021” is: “Update internal PSL tracking systems to reflect the extended deadline of September 30, 2021 for new on-lending loans to NBFCs.” (RBI issued this 07 Apr 2021).
Circular: RBI/2021-22/15 -- PSL On-Lending to NBFCs Extended Till Sep 30, 2021
Issued: 07 Apr 2021
Action required: Update internal PSL tracking systems to reflect the extended deadline of September 30, 2021 for new on-lending loans to NBFCs.
Action required: Ensure that loans to HFCs for housing on-lending continue to be classified as PSL on an ongoing basis as per existing guidelines.
Action required: Review existing on-lending loan portfolios to confirm that loans disbursed before the extension remain classified as PSL until maturity.
Action required: Communicate the extension to relevant credit and compliance teams to align lending strategies with the revised timeline.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12069&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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