Small Finance Banks (SFBs) are getting contemporary credit score requests from smaller micro-finance establishments (MFIs) for on-lending after the Reserve Financial institution of India in Might allowed precedence sector lending classification to contemporary credit score prolonged by these banks to micro-lenders. After getting the proposals from MFIs, SFBs have began the method of providing contemporary credit score amenities beneath precedence sector lending (PSL).
The RBI, issuing a round on Might 5, mentioned in view of the contemporary challenges introduced on by the pandemic, and to handle the emergent liquidity place of smaller MFIs, it has been determined to permit PSL classification to the contemporary credit score prolonged by SFBs to registered NBFC-MFIs and different MFIs, that are members of RBI- recognised Self-Regulatory Organisation of the sector and which have a gross mortgage portfolio of as much as Rs 500 crore as on March 31, 2021, for the aim of on-lending to people.
Ujjivan Small Finance Financial institution has obtained proposals from NBFC-MFIs for contemporary lending. “We’re in dialogue with quite a lot of MFIs now. However, I feel we’re more likely to take a number of calls. Can’t say what number of. To date we have now not disbursed any. We’re more likely to take some calls,” the financial institution’s MD & CEO Nitin Chugh instructed FE. “Since inception, we have now been extending assist to MFIs. Now, we’re permitted to present contemporary lending to smaller MFIs with asset-size of as much as Rs 500 crore. Aside from MFIs, we have now prolonged credit score amenities to these establishments which assist budding smaller MFIs. We have now began the method of contemporary credit score amenities to MFIs beneath PSL and we’re getting contemporary credit score requests from them,” ESAF Small Finance Financial institution mentioned.
Notably, the PSL dispensation will likely be legitimate as much as March 31, 2022. Nevertheless, loans thus disbursed will proceed to be categorized beneath precedence sector until the date of reimbursement/maturity, whichever is earlier.
In accordance with credit standing businesses, as most small finance banks had operated as MFIs earlier than changing into an SFB, they’ve understanding of the micro-finance house and could be in a greater place to judge the credit score profiles of the smaller MFIs to lend. And, the PSL categorisation ought to incentivise SFBs to on-lend to smaller MFIs, that are at the moment dealing with funding constraints following the resurgence of the second Covid wave.