RPCD.PLNFS. No.40 /06.02.31/2003-04

November 3, 2003

The Chairman/Managing Director
All Scheduled Commercial Banks
(including RRBs & Local area Banks)

Dear Sir,

Credit Facilities for Small Scale Industries (SSIs)- Lending by Banks to NBFCs for the purpose of on-lending to SSIs

Please refer to circulars RPCD. No. PLAN. BC. 82 / 04.09.01/98-99 and RPCD.No. BC. PLAN.17/04.09.01/98-99 dated March 12, 1999 and July 31, 1998 respectively, in terms of which, the quantum of lending by banks to NBFCs for the purpose of on-lending to the tiny sector and small road & water transport operators (SRWTOs) is reckoned within the ambit of priority sector lending.

2. In this connection, please refer to paragraph 52 of the Governor’s Statement on the mid-term Review on Monetary and Credit Policy for the year 2003-04 forwarded with circular No.MPD.BC.241/07.01.279/2003-04 dated November 3, 2003 (copy of the paragraph enclosed). With a view to further enhancing the credit flow to the SSI sector, it has been decided that all new loans granted by banks to NBFCs for the purpose of on-lending to SSI sector would also be reckoned as under priority sector lending.

3. We shall be glad if you please issue necessary instructions to your controlling offices/branches in the matter for appropriate action.

4. Please acknowledge receipt.

Yours faithfully,

(Varughese John)
Chief General Manager

 

 

Lending by Banks to NBFCs

52. As indicated in the annual policy Statements of April 1999 and 2000, bank loans to non-banking financial companies (NBFCs) for the purpose of on-lending to agriculture, tiny sector and small road and water transport operators are reckoned under priority sector lending. On a suggestion from a Chamber of Commerce, and with a view to further enhancing the credit flow to SSI sector, it is proposed that: :

All new loans granted by banks to NBFCs for the purpose of on-lending to SSI sector would also be reckoned under priority sector lending.