RBI has allowed joint lending to push priority sector loans and to reap the benefit of the strengths of two sets of lenders. On Friday the 21st September 2018, it has set the rules and regulations for this new concept. It further states
- The Banks should share a maximum 80% credit risk when they originate priority sector loans jointly with non-banking finance companies (NBFCs).
- The regulator also said the lenders should charge a single interest rate to borrowers.
- This is to ensure that the benefit of low cost funds from banks and lower cost of operations of NBFCs would be passed on to the ultimate beneficiary through the blended rate/ weighted average rate.
- A single blended interest rate (for fixed rate loans) should be offered to the ultimate borrower based on the respective interest rates and proportion of risk sharing.
- For floating rate customers, the lending rate will be arrived at by taking weighted average of the benchmark interest rates in proportion to the respective loan contribution.
- A minimum 20% of the credit risk by way of direct exposure shall be on NBFC’s books till maturity and the balance will be on bank’s books.
- RBI data reveals that the total priority sector loans stood at Rs 24.97 lakh crore which was an year on year increase of 6.3%,
- Banks are mandated to lend 40% of their net bank credit in the previous fiscal year to priority se Sectors like- Agriculture, Affordable Housing and others.