RBI Governor says SFB loans to MFIs for on-lending now classified as priority sector lending

RBI Governor Shaktikanta Das has recently announced that small finance banks were being permitted to regard fresh loans to microfinance institutions (MFIs), with asset size up to Rs. 500 crore, for on-lending to individual borrowers as priority sector lending, amid the ongoing COVID-19 pandemic.

“At present, lending by small finance banks (SFBs) to microfinance institutions for on-lending is not reckoned for priority sector lending (PSL) classification. In view of the fresh challenges brought on by the pandemic and to address the emergent liquidity position of smaller MFIs, SFBs are now being permitted to reckon fresh lending to smaller MFIs – with asset size of up to Rs. 500 crore – for on-lending to individual borrowers as priority sector lending,” Shaktikanta Das quoted, adding that this facility will be available up to March 31, 2022.